In a recent development, the Federal Reserve Bank of New York has stood its ground on the decision to terminate a Puerto Rican bank’s access to the U.S. central banking system. This action follows a federal crackdown on financial institutions with ties to Venezuela, a situation that has led to legal action by Banco San Juan International (BSJI), according to a report by Reuters.
BSJI had filed a lawsuit against the New York Fed, seeking to halt the impending termination of its “master account.” This account permits banks to utilize the Federal Reserve’s electronic payment system. The dispute arose due to concerns over BSJI’s adherence to U.S. sanctions and anti-money laundering regulations.
During a prior 22-month suspension of its master account between 2019 and 2020, BSJI claimed to have enhanced its compliance efforts. This suspension was prompted by a federal investigation into credit agreements with Petroleos de Venezuela, a state-owned oil company subject to U.S. sanctions. The suspension reportedly had a significant impact on BSJI’s customer relationships.
In response, the New York Fed stated in court documents that BSJI had processed transactions displaying “multiple red flags” for potential money laundering or illicit activities. As of June, the bank served a mere 13 customers, predominantly based in Curacao. Notably, these customers included immediate family members of the bank’s owner, Marcelino Bellosta.
The New York Fed also highlighted that BSJI could explore the possibility of accessing the U.S. financial system through a third-party correspondent bank. Legal representation for BSJI declined to provide comments.
Bellosta, a Venezuelan national, has spent much of the past 25 years residing in the United States and Europe. In 2020, BSJI paid $1 million to resolve the investigation linked to its dealings with PDVSA, maintaining the legality of the credit agreements. Federal authorities subsequently released $53 million in seized funds.
Historically, Puerto Rico’s banking sector has maintained close connections with Venezuela, a member of the OPEC. The New York Fed’s decision to cease approving master accounts for certain Puerto Rican banks in 2019 aligned with U.S. sanctions designed to address Venezuela’s political landscape, as reported by Reuters.
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