Fraudulent Banking Practices Exposed in Puerto Rico: Bancrédito Ordered to Pay $15 Million Fine
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The Financial Crimes Enforcement Network (FinCEN) has taken a significant step against banking sector fraud cases in Puerto Rico by ordering Bancrédito International Bank and Trust Corp. to pay a $15 million fine for allegedly violating the Bank Secrecy Act (BSA).
Background
Bancrédito, founded in 2008 by Venezuelan-Italian citizen Julio Velutini, aimed to serve foreign banks in Central America and the Caribbean. However, its activities were marred by allegations of fraud and corruption.
Violations and Findings
According to FinCEN, Bancrédito:
- Failed to file timely suspicious activity reports between October 2015 and May 2022
- Neglected to establish an adequate due diligence program for correspondent accounts managed in the United States
- Did not implement or maintain a robust anti-money laundering (AML) program
The investigation revealed that Bancrédito inadequately monitored transactions involving entities in Venezuela and Panama, including those linked to Panamanian banks and individuals. Transactions also involved activity by one of the bank’s executives.
Consequences
As part of the settlement, Bancrédito must:
- Surrender its license to operate in the US as an IBE
- 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”.
Impact and Response
The fine 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. The case highlights the need for stricter regulations and increased scrutiny in the banking sector to prevent fraudulent activities.
FinCEN Director Andrea Gacki stated: “Bancrédito processed millions of dollars in suspicious transactions through the United States on behalf of high-risk customers, providing correspondent accounts to foreign financial institutions without the required due diligence and reporting required by the BSA. With today’s action, FinCEN is sending the message that the era of easy money laundering through Puerto Rican international banking entities is over.”
Timeline
- 2008: Bancrédito founded
- October 2015-May 2022: Suspicious activity reports not filed
- August 2022: Julio Velutini turns himself in to authorities
- January 2023: Office of the Commissioner of Financial Institutions seizes Bancrédito
- March 2021: Gap rule takes effect