Puerto Rican IBE pays $15M for willful BSA violations

FinCEN has issued a consent order imposing a civil money penalty of $15,000,000 on Bancrédito International Bank and Trust Corporation, an International Banking Entity (IBE) operating in Puerto Rico under the International Banking Center Regulatory Act of 1989 (known as Law 52). 14 IBEs provide banking and other financial services and are granted special tax benefits.

IBEs that provided banking services were required under the BSA (and Puerto Rico law) to identify and report suspicious transactions relevant to a possible violation of law or regulation, and to implement due diligence programs for correspondent accounts established, maintained, administered, or managed in the United States for foreign financial institutions.Beginning March 15, 2021, IBEs were required under the BSA to implement AML programs.

The bank was placed under receivership in 2023 by the Office of the Commissioner of Financial Institutions of Puerto Rico (OCIF). Prior to that action, Bancrédito offered several banking products and services including foreign correspondent banking, checking accounts, certificates of deposit, debit cards, commercial loans, and trade finance and investment property secured loans, mostly to customers in Venezuela and Florida.

Beginning in 2016, Bancrédito expanded its services to provide U.S. dollar-denominated correspondent accounts for foreign financial institutions—that is, it permitted foreign financial institutions to hold U.S. dollar-denominated accounts at Bancrédito. The Bank provided such services to foreign financial institutions operating in Central America and the Caribbean, although often the counterparties, the ultimate senders and recipients, were located in Venezuela. As such, during the Relevant Time Period, Bancrédito’s customer base and aspects of its business model put it at an elevated risk for AML concerns.

The high-risk nature of Bancrédito’s customer base, especially those with ties to Venezuela, warranted robust BSA compliance. Instead, the Bank’s compliance with the BSA has been marked by repeated deficiencies and violations, as reported in multiple OCIF examinations. OCIF examined the Bank in 2010, 2012, and 2014, and in each case identified several BSA deficiencies and other violations, including failure to report suspicious activity to FinCEN and AML program violations (consistent with BSA requirements). On October 1, 2015, Bancrédito entered into a consent order (2015 Consent Order) with OCIF, in which it agreed to remedy these failures and violations.

In 2017 and 2019, OCIF examined Bancrédito and cited it for additional BSA violations, including failures to file SARs, failures to document decisions not to file SARs, and failures related to due diligence on correspondent accounts for foreign financial institutions, among other AML program deficiencies. On December 20, 2021—after the BSA required the Bank to comply with AML program requirements—Bancrédito and OCIF entered into a Memorandum of Understanding (2021 MOU). Bancrédito paid a fine and agreed to undertake remedial measures to address these ongoing violations. Bancrédito failed to comply with provisions of the 2021 MOU,
including the requirement to establish a BSA/AML special compliance committee with a minimum number of independent directors. On May 16, 2022, OCIF began legal proceedings related to Bancrédito’s breach of the 2021 MOU.

In addition agreeing to the civil money penalty, Bancrédito agreed to surrender its IBE license, and that it will not seek to repudiate, or otherwise cancel the surrender of its IBE license, and not seek to obtain any new banking license. This requirement is distinct from any requirement contained in OCIF’s Receivership Order.