On February 24, the FDIC informed the U.S. District Court for the District of Kansas that it would no longer defend its use of administrative law judges (ALJs). As previously covered by InfoBytes, DOJ declared the multiple layers of removal restrictions shielding ALJs were unconstitutional in a § 530D letter. The FDIC’s filing was part of a lawsuit it received from a state-chartered bank challenging the FDIC’s use of ALJs to adjudicate penalties assessed in 2024 for alleged BSA/AML violations (previously covered by InfoBytes here).

Despite conceding the point, the FDIC maintained in its notice that the court should dismiss the bank’s request for injunctive relief against further administrative proceedings. The FDIC argued the bank had not demonstrated that, absent the removal provisions, the ALJ “would have been removed or the proceedings would be different.” Seeking to leverage the FDIC’s concession, the bank quickly filed a response asserting the FDIC cannot continue to subject it to proceedings that it acknowledges as unconstitutional.