In An Investigation Related To Venezuela, a Puerto Rican Bank Has Filed a Lawsuit Against The NY Fed

Banco San Juan Internacional (BSJI) stated in a complaint filed in Manhattan federal court that the New York branch of the Federal Reserve informed the bank earlier this year that its "master account" - which gives banks access to the Fed's electronic payment systems - would be terminated due to concerns regarding the bank's compliance with U.S. sanctions and anti-money laundering regulations.

The bank asked the court to prevent the New York Fed from terminating its master account, claiming that without it, it "cannot effectively function as a depository institution."

A New York Fed representative declined to comment.

BSJI stated that it enhanced its compliance programme during a previous 22-month suspension of its master account between 2019 and 2020, as a result of a federal investigation into money laundering and sanctions evasion involving its 2016 and 2017 credit agreements with Petroleos de Venezuela.

In 2020, BSJI consented to pay $1 million to end the investigation. Federal prosecutors dismissed a claim for civil forfeiture and returned $53 million to the bank.

According to BSJI, the loan agreements were legal.

Historically, the financial industry of Puerto Rico has maintained close ties with OPEC member Venezuela. Reuters reported in 2019 that the New York Fed would cease approving master accounts for some Puerto Rican banks due to U.S. sanctions on Venezuela aimed at removing socialist President Nicolas Maduro.

"Inappropriate targeting of BSJI because it was founded by a Venezuelan national more than a decade ago... is, of course, patently unreasonable (and illegal)," BSJI wrote in its complaint, citing the Reuters article.

The bank stated that its originator, Marcelino Bellosta, has spent the majority of the last 25 years in the United States and Europe.