The U.S. Department of the Treasury says a bank with Canadian ties has facilitated hundreds of millions of dollars of money laundering for drug traffickers.

On Thursday, Treasury’s Financial Crimes Enforcement Network filed a notice of proposed rule making, in which it proposes prohibiting U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for Lebanese Canadian Bank SAL.

Treasury has identified LCB and its subsidiaries as a financial institution of “primary money laundering concern… for the bank’s role in facilitating the money laundering activities of an international narcotics trafficking and money laundering network.”

LCB is based in Beirut and maintains a network of 35 branches in Lebanon and has a representative office in Montreal. Treasury says that it was originally established in 1960 and operated as a subsidiary of the Royal Bank of Canada Middle East from 1968 to 1988, and is now a privately owned Lebanese bank.

“This action seeks to protect the U.S. financial system from the illicit proceeds flowing through LCB and to deprive this international narcotics trafficking and money laundering network of its preferred access point into the formal financial system,” said under secretary for terrorism and financial intelligence, Stuart Levey. “Any financial institution that collaborates in illicit conduct on this scale risks losing its access to the United States.”

In a policy statement on its website the bank indicates that, “Even unintentional involvement in any criminal activity is of a great concern to the Lebanese Canadian Bank, SAL management and shareholders since the public’s confidence in the institution may be undermined through such activity.” The bank says the policy aims to guard against unintentional involvement in any criminal activity, and to state its policy of co-operating with law enforcement and regulatory agencies.

Treasury alleges that a trafficking network moves illegal drugs from South America to Europe and the Middle East via West Africa and launders hundreds of millions of dollars monthly through accounts held at LCB, as well as through trade-based money laundering involving consumer goods throughout the world, including through used car dealerships in the United States. Treasury says it has reason to believe that LCB managers are complicit in the network’s money laundering activities.

“The Lebanese Canadian Bank for years has participated in a sophisticated money laundering scheme involving used cars purchased in the United States and consumer goods overseas. Thanks to DEA-led operations, as well as today’s Treasury action, we are exposing and disrupting this money laundering network and its connections to global drug trafficking and Hizballah,” said DEA administrator, Michele Leonhart.

Treasury says it will work with the Lebanese Central Bank and other Lebanese authorities to address its concerns.

IE