FinCEN Proposes To Designate Banque Misr UAE As A Primary Money Laundering Concern And Revoke Correspondent Banking Access

The Financial Crimes Enforcement Network (“FinCEN”) has proposed to revoke Banque Misr UAE’s (the “Bank”) correspondent banking access to U.S. financial institutions, finding that that the Bank is a financial institution operating outside of the U.S. and is of primary money laundering concern (the “Proposed Rule”).

This proposal was in direct response to current Iran sanctions and the Treasury Department’s “Operation Economic Outcast,” that launched in late August and sought to sever “financial lifelines” that sustain the Iranian regime. The operation mapped financial channels that Iran uses to evade sanctions and fund terrorist activities.

Treasury Secretary Bessant noted that “Treasury promised to sever every economic lifeline Tehran has left and finally end the threat of the Iranian regime.” FinCEN utilizes their authority pursuant to Section 11 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”).

Section 311 grants the Treasury Secretary the authority to make a finding that reasonable grounds exist a financial institution operating outside of the U.S. is “of primary money laundering concern.” 31 U.S.C. 531A.

Grounds for Designation as a Primary Money Laundering Concern

The Bank is a commercial bank with five UAE-based branches and, according to the Proposal Rule, serves as a “critical access node” to the U.S. dollar for Iranian illicit finance. The Bank provides correspondent banking services to customers through three correspondent relationships with U.S. financial institutions.

As grounds for the designation, FinCEN looked at the following statutory factors: the extent to which the Bank is used to facilitate or promote money laundering; the extent to which the Bank is used for legitimate purposes; and the extent to which the action is sufficient to ensure that against international money laundering and other crimes.

The Proposed Rule estimates between 2024 and 2026, the Bank processed approximately $1.8 billion as part of “shadow banking” operations on behalf of 103 companies. Overall, FinCEN estimates approximately $9 billion of potential Iranian shadow banking activity occurred through U.S. correspondent accounts in 2024.

Shadow banking networks consist of Iran-based exchange houses and front companies that enable Iran-sanctioned companies to access the U.S. financial system through correspondent accounts. The Proposed Rule notes that front companies are predominantly registered in third-country jurisdictions, including the UAE to obscure beneficial ownership, disguise the origin of funds, and enable the movement of money.

While acknowledging that the Bank is likely used for legitimate purposes as well, there is evidence of shadow banking activity through the Bank.

Implications of the Proposed Rule

The comment period is open until October 1, 2026. If finalized, U.S. financial institutions:

• are prohibited from opening or maintaining any correspondent accounts for the Bank, or on the Bank’s behalf;
• must take reasonable steps to not process any transactions for a correspondent account in the U.S. of a foreign banking institution if the transaction involve the Bank; and
•  must apply special due diligence measures to their foreign correspondent accounts that are reasonably designed to guard against processing transactions involving the Bank.

As proposed, the prohibition is limited to the Bank’s five UAE-based branches. FinCEN estimates that the burden of the proposal on U.S. financial institutions exists, but is minimal and would most commonly involve adding the Bank to preexisting sanctions screening and money laundering tools.

Upon the release of the Proposed Rule, it was reported that UAE and Egyptian central banks were coordinating in connection with FinCEN’s Proposed Rule.