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US Financial Institutions Ordered To Sever Ties With Offshore Shell Banks

by Philip Morton, Investors Offshore.com

18 December 2001


As part of its tough new crackdown on money laundering, the US Treasury Department has ordered banks and securities firms to sever all ties with foreign 'shell banks', which it considers are highly vulnerable to money laundering practices.

'Shell' banks are foreign banks based in regions with strict banking secrecy laws which maintain no physical presence in any country, and the new regulations regarding correspondent accounts with such entities will being the US into line with most other industrialised countries.

The Treasury has announced that the new rules, which come into force from December 25th 2001, are intended to provide a 'comprehensive approach', by covering securities brokers as well as banks in the US, and will 'maintain parity in treatment between accounts provided to foreign banks by banks and broker-dealers.'

The new legislation will also require foreign banks which maintain US accounts to make records available to US criminal investigators, even if the material in question is held outside the United States.


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