Financial Crime World

Puerto Rico Bank Faces $15 Million Fine for Failure to Comply with Banking Security Measures

Bancrédito International Bank and Trust Corp. Ordered to Pay $15 Million in Settlement

In a significant blow to banking security measures in Puerto Rico, Bancrédito International Bank and Trust Corp. has been ordered to pay $15 million to resolve an investigation into alleged Bank Secrecy Act violations by the Financial Crimes Enforcement Network (FinCEN). The agency found that the bank failed to timely file suspicious activity reports between October 2015 and May 2022, inadequately monitored transactions involving entities in Venezuela, and failed to establish a due diligence program for correspondent accounts managed in the US.

Investigation Reveals Serious Violations

The investigation revealed that Bancrédito processed millions of dollars in suspicious transactions through the United States on behalf of high-risk customers. The bank provided correspondent accounts to foreign financial institutions without the required due diligence and reporting required by the Bank Secrecy Act. FinCEN Director Andrea Gacki stated, “the era of easy money laundering through Puerto Rican international banking entities is over” with this enforcement action.

First Enforcement Action Against a Puerto Rican International Banking Entity

This penalty marks the first enforcement action against a Puerto Rican International Banking Entity (IBE) under the so-called gap rule, which took effect in March 2021 to make banks abide by anti-money laundering rules when servicing international financial institutions. Under FinCEN’s order, Bancrédito must:

  • Surrender its license to operate in the US as an IBE
  • Preserve all business records related to Bank Secrecy Act compliance

Background on Bancrédito International Bank and Trust Corp.

Bancrédito was founded in 2008 by Julio Velutini, a citizen of Venezuela and Italy, with the aim of serving foreign banks in Central America and the Caribbean. However, its founder turned himself in to authorities in August 2022 after being accused of bribing Puerto Rico’s former Governor Wanda Vazquez to undermine an investigation into his bank.

Office of the Commissioner of Financial Institutions Takes Action

The Office of the Commissioner of Financial Institutions seized Bancrédito in January. The bank has threatened to take legal action against FinCEN, calling the enforcement action “unjustified”. This case highlights the importance of strict compliance with banking security measures to prevent money laundering and other financial crimes.

Conclusion

Bancrédito’s failure to comply with banking security measures has resulted in a significant fine and loss of its license to operate in the US. This enforcement action serves as a warning to banks around the world to prioritize compliance with anti-money laundering rules and Bank Secrecy Act requirements.