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Puerto Rico Takes Steps to Eliminate Fraud and Money Laundering in Banking Sector
Puerto Rico has made significant strides in combating illicit banking activity, according to recent statements from government officials. The island’s central government and legislature have taken concrete steps to strengthen its regulatory and supervisory framework.
Strengthening Regulatory Framework
The Office of the Commissioner of Financial Institutions (OCIF) has been at the forefront of these efforts, led by Commissioner Natalia Zequeira. “We focused all our resources on strengthening our investigative unit, supervision of entities under our regulation, and acting firmly against institutions that do not comply with applicable federal and state laws and regulations,” she said.
Recent Mandates
Two recently passed mandates - Acts 44 and 45 of 2024 - aim to improve the regulatory framework for International Banking Entities (IBEs) and International Financial Entities (IFEs). These entities were previously identified as a risk to the US financial system due to their offshore banking business model.
International Cooperation
US Treasury Under Secretary Brian Nelson met with Puerto Rico Governor Pedro Pierluisi and OCIF officials to discuss key illicit finance issues, including:
- Countering illicit fentanyl and narcotics trafficking
- Strengthening anti-money laundering and counter-terrorism regulations
- Promoting awareness among the Puerto Rican business community of beneficial ownership reporting requirements
Nelson praised Puerto Rico’s efforts, saying that the agency’s oversight has driven reforms in the island’s financial sector.
Challenges Remain
Despite these positive developments, challenges remain. Many US banks have begun to minimize their exposure risks to IBEs and IFEs by closing their accounts. Pierluisi expressed his commitment to continuing to work with Nelson to ensure a banking system on the island that is always in compliance with current laws and regulations.
FinCEN’s Role
The Financial Crimes Enforcement Network (FinCEN) Director Andrea Gacki hosted the first-ever FinCEN Exchange in Puerto Rico in February. The US Treasury’s 2022 National Money Laundering Risk Assessment identified increased risks in Puerto Rico due to the existence of cooperativas and IBEs/IFE’s offshore banking business model.
Enforcement Actions
In response, the OCIF has taken action against institutions that violate anti-money laundering regulations. For example:
- In September 2023, FinCEN announced a $15 million civil penalty against Bancrédito International Bank and Trust Corp. for violations of the Bank Secrecy Act.
- Prior to that, in October 2022, the US Treasury Department’s Office of Foreign Assets Control found Nodus International Bank Inc., an IFE in Puerto Rico, in violation of Venezuelan sanctions.
Conclusion
The efforts by Puerto Rico’s government and regulatory bodies have been praised as a positive step towards eliminating fraud and money laundering in the banking sector. However, there is still more work to be done to ensure the island’s financial system remains compliant with international regulations and standards.