Puerto Rico Financial Crimes: Bancrédito International Bank and Trust Corp. Ordered to Pay $15 Million Fine for Bank Secrecy Act Violations
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Introduction
In a landmark enforcement action, the Financial Crimes Enforcement Network (FinCEN) has ordered Puerto Rico-based Bancrédito International Bank and Trust Corp. to pay a hefty fine of $15 million for allegedly violating the Bank Secrecy Act (BSA). The agency accused the bank of failing to timely file suspicious activity reports between October 2015 and May 2022, inadequately monitoring transactions involving entities in Venezuela, and neglecting to establish a due diligence program for correspondent accounts managed in the United States.
Violations
According to FinCEN, Bancrédito failed to implement and maintain an anti-money laundering (AML) program, which allowed millions of dollars in suspicious transactions to flow through the US on behalf of high-risk customers. The bank also provided correspondent accounts to foreign financial institutions without conducting the required due diligence and reporting under the BSA.
- Failing to timely file suspicious activity reports between October 2015 and May 2022
- Inadequately monitoring transactions involving entities in Venezuela
- Neglecting to establish a due diligence program for correspondent accounts managed in the United States
Investigation Findings
The investigation, which spanned nearly seven years, revealed that Bancrédito inadequately monitored transfers of funds from accounts linked to Panamanian bank servicing companies and individuals in Panama and Venezuela. Furthermore, FinCEN discovered that a Bancrédito executive was involved in these transactions.
Connection to Political Corruption
Bancrédito’s troubles began when its founder, Julio Velutini, 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. Vazquez was subsequently arrested and accused of accepting campaign bribes.
Director’s Statement
FinCEN Director Andrea Gacki described the penalty as a warning that “the era of easy money laundering through Puerto Rican international banking entities is over.” The agency took particular note of the fact that this enforcement action marks the first under the so-called “gap rule,” which came into effect in March 2021 to ensure that banks abide by AML rules when servicing international financial institutions.
Settlement Terms
As part of the settlement, Bancrédito must surrender its license to operate as an International Banking Entity (IBE) in the US and preserve all business records related to BSA compliance. However, the bank’s holding company has threatened to take legal action against FinCEN, calling the enforcement action “unjustified.”
Conclusion
In a separate development, Bancrédito was seized by its primary regulator, the Office of the Commissioner of Financial Institutions, in January. The penalty serves as a stark reminder that financial crimes will no longer be tolerated in Puerto Rico, and that banks must adhere to strict AML regulations to prevent money laundering and other illicit activities.