On February 26th, 2026, FinCEN issued a Notice of Proposed Rulemaking (NPRM) designating Zurich-based MBaer Merchant Bank AG as a financial institution of “primary money laundering concern” under Section 311 of the USA PATRIOT Act. The action proposes to sever MBaer’s access to the U.S. dollar-based financial system. Within 24 hours, Swiss regulator FINMA withdrew MBaer’s banking license and ordered the institution into liquidation, bringing a coordinated end to a bank that had operated for less than eight years.
Key Highlights
- FinCEN designated MBaer Merchant Bank AG under Section 311 of the USA PATRIOT Act on February 26th, 2026, proposing to prohibit U.S. financial institutions from opening or maintaining correspondent accounts for the bank.
- U.S. authorities allege that MBaer funneled over $100 million through the U.S. financial system on behalf of illicit actors tied to Iran, Russia, and Venezuela, including networks connected to Iran’s Islamic Revolutionary Guard Corps (IRGC) and its Quds Force.
- MBaer allegedly processed more than $37 million linked to an oil smuggling scheme benefiting the IRGC, and handled transactions connected to Venezuelan state oil company PDVSA.
- FINMA found that 98% of MBaer’s recent client assets came from high-risk sources and that 80% of its business relationships carried elevated risk, which the regulator described as “extremely serious.”
- Facing the loss of U.S. dollar access, MBaer’s board withdrew its court appeal, making FINMA’s liquidation order enforceable. The board subsequently resigned.
- The case illustrates what happens when customer due diligence failures go unmitigated for years and underscores why robust sanctions screening is not optional for institutions with cross-border exposure.
What Is Section 311 and Why Does It Matter?
Section 311 of the USA PATRIOT Act grants the Secretary of the Treasury the authority to declare a foreign financial institution a “primary money laundering concern” and impose one or more of five escalating “special measures.” The most severe, Special Measure Five, prohibits U.S. financial institutions from opening or maintaining correspondent accounts for the designated entity. In practical terms, it cuts off access to the U.S. dollar.
FinCEN has deployed Section 311 selectively since the tool was created after the September 11th, 2001 attacks. In roughly 85% of historical cases where a designation was finalized, the targeted institution either collapsed or underwent significant restructuring. Even at the proposal stage, correspondent banks routinely sever ties preemptively to avoid secondary compliance exposure. The last European bank to face this level of U.S. pressure was Latvia’s ABLV, shuttered in 2018 following money laundering and sanctions allegations. MBaer now joins that short list.
MBaer’s Business Model and the Red Flags That Preceded Action
Founded in December 2018 by Michael Bär, a former Julius Bär executive, MBaer operated as a boutique Zurich-based institution serving wealthy international clients. By the end of 2025, it held approximately CHF 4.9 billion in assets across nearly 700 client relationships. According to FinCEN and FINMA, its growth was fueled in part by a willingness to process transactions that larger, more compliance-mature institutions refused, sometimes charging clients up to ten times the prevailing market rate.
FinCEN’s NPRM outlined four categories of concern:
- Business model risk: MBaer maintained a high-risk client base without adequate mitigating controls and in some cases allegedly facilitated illicit activity directly.
- Venezuelan corruption: The bank allegedly processed funds tied to oil smuggling schemes involving PDVSA, depriving the Venezuelan public of proceeds from illegal crude oil sales.
- Russian money laundering: The bank allegedly managed front companies for sanctioned persons and facilitated payments tied to Ukrainian grain theft and Russian military procurement.
- Iranian illicit finance: MBaer allegedly processed more than $37 million connected to an IRGC oil smuggling operation and handled payments for a company linked to an Iranian shadow fleet tanker.
FINMA found the bank had repeatedly overruled its own compliance department and helped clients circumvent asset freezes. Protective data measures applied to Russian client files in 2024, the same year FINMA opened its investigation, led FinCEN to assess that MBaer may have been deliberately concealing information from Swiss regulators.
How the Coordinated Action Unfolded
FINMA had concluded its enforcement proceedings several weeks before the FinCEN announcement, but MBaer’s appeal to Switzerland’s Federal Administrative Court left the outcome unenforceable. Under Switzerland’s regulatory framework, that process can take 12 to 18 months, and institutions may continue operating throughout. This gap between U.S. administrative speed and Swiss procedural timelines appears to be what FinCEN’s designation was designed to close.
Once the NPRM was published, MBaer’s position became untenable. The board withdrew its appeal, making FINMA’s liquidation order enforceable. FINMA appointed liquidators and opened proceedings against four unnamed individuals who may bear personal liability for the violations. Treasury Secretary Scott Bessent stated that “banks 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.”
Section 311 Special Measures at a Glance
| Special Measure | Requirement |
| One | Recordkeeping on certain accounts or transactions |
| Two | Beneficial ownership information collection |
| Three | Information on payable-through accounts |
| Four | Information on correspondent accounts |
| Five | Prohibition on correspondent or payable-through accounts (regulation only) |
Special Measure Five is reserved for cases where no lesser remedy is sufficient. FinCEN’s NPRM confirmed it had considered all alternatives and concluded that full prohibition was the only adequate response.
What Compliance Teams Should Take Away
The MBaer case is not a one-off. FinCEN’s November 2025 Section 311 action targeted ten Mexican gambling establishments tied to the Sinaloa Cartel, and its June 2025 orders under the FEND Off Fentanyl Act cut off three Mexican financial institutions from the U.S. system. The pattern is clear: FinCEN is deploying its most powerful tools more frequently and across more jurisdictions, including those of allied nations.
For teams managing cross-border payment exposure, several lessons apply directly. Correspondent banking due diligence is both a legal obligation and a live risk. Onboarding failures compound over time. Regulatory coordination across borders is now standard, not exceptional; FinCEN and FINMA maintained parallel inquiries for years before acting in unison.
Enforcement does not require a single dramatic event. It follows a pattern of clients accepted without scrutiny, red flags unaddressed, and compliance functions ignored. That pattern, built over years, is what draws regulatory attention. When that attention arrives, as MBaer’s collapse demonstrates, the consequences tend to be both swift and final.
