U.S. Treasury invokes powerful new weapon, warns of coming rule prohibiting correspondent accounts with Nauru banks

Following the designation of Nauru in December 2002 as a "primary money laundering concern," on April 15, the U.S. Treasury issued a notice of proposed rulemaking requiring all U.S. financial institutions to terminate correspondent accounts with banks from the tiny South Pacific island. Treasury acted under the authority of one of its most powerful new weapons against jurisdictions it thinks have weak anti-money laundering regimes, Section 311 of the USA Patriot Act. That law authorizes to impose "special measures" pursuant to regulation against jurisdictions, financial institutions and types of accounts it finds are deficient in money laundering controls. In its...