The New York Fed Defends Its Decision To Cut Off a Puerto Rican Bank Following a Crackdown Attributed To Venezuela

Concerned about its compliance with U.S. sanctions and anti-money laundering regulations, Banco San Juan Internacional (BSJI) sued the New York Fed in July to prevent the impending closure of its "master account," which grants banks access to the Fed's electronic payment system.

BSJI stated that compliance had improved during the 22-month suspension of its master account between 2019 and 2020. This was the result of a federal investigation into credit agreements it had with Petroleos de Venezuela, which is subject to U.S. sanctions.

According to the bank, the suspension "decimated" its consumer relationships.

Wednesday, the New York Fed stated in court documents that BSJI processed transactions with "multiple red flags for money laundering or other illicit activity."

According to the report, as of June, BSJI served only 13 customers, the majority of whom were based in Curacao and included close relatives of the bank's proprietor, Marcelino Bellosta.

Additionally, the New York Fed stated that BSJI could still access the U.S. financial system via a third-party correspondent bank.

A BSJI attorney declined to comment.

According to BSJI, Bellosta, a Venezuelan national, has spent the majority of the last 25 years in the United States and Europe.

The bank paid $1 million in 2020 to settle the PDVSA investigation while maintaining the legality of the credit agreements, and federal authorities returned $53 million in seized funds.

Historically, Puerto Rico's financial industry 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 aimed at ousting Venezuela's socialist president Nicolas Maduro.

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