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FinCEN Imposes $15 Million Penalty on Bancrédito for BSA Violations: A Landmark Action Against a Puerto Rican IBE

Due DiligenceFinCEN Imposes $15 Million Penalty on Bancrédito for BSA Violations: A Landmark Action Against a Puerto Rican IBE

The Financial Crimes Enforcement Network (FinCEN) announced a significant enforcement action against Bancrédito International Bank and Trust Corporation (Bancrédito) for willful violations of the Bank Secrecy Act (BSA) and its implementing regulations. This action, dated July 27, 2023, includes a $15 million civil money penalty and marks the first enforcement action by FinCEN against a Puerto Rican International Banking Entity (IBE). The violations by Bancrédito occurred between October 2015 and May 2022 and encompassed several key areas:

  1. Failure to Report Suspicious Transactions: Bancrédito was found to have processed millions of dollars in suspicious transactions through the United States on behalf of high-risk customers without timely reporting these transactions to FinCEN. Timely reporting of suspicious transactions is crucial for providing law enforcement with essential financial intelligence to combat money laundering and safeguard national security.
  2. Lack of Due Diligence Program: The bank failed to establish a due diligence program for correspondent accounts established, maintained, administered, or managed in the United States for foreign financial institutions. Correspondent accounts held by foreign financial institutions in the U.S. can present unique risks that need to be appropriately managed to prevent illicit financial activities.
  3. Failure to Implement and Maintain an AML Program: Bancrédito also admitted to failing to implement and maintain an Anti-Money Laundering (AML) program. Starting on March 15, 2021, IBEs (International Banking Entities) and other banks without a Federal functional regulator were required to have an AML program in place. AML programs are crucial tools for preventing financial institutions from being used for money laundering and other financial crimes.

These violations had significant implications for the U.S. financial system and national security, as they allowed for a flow of funds through the U.S. financial system without the appropriate safeguards and due diligence measures in place.

Bancrédito, which was among the oldest and largest IBEs in Puerto Rico, was found to have engaged in these violations, which were particularly concerning given the elevated risk of money laundering associated with IBEs, as highlighted in the U.S. Department of the Treasury’s 2022 National Money Laundering Risk Assessment.

This enforcement action underscores FinCEN’s commitment to enforcing BSA regulations and combating money laundering and financial crimes. It sends a clear message that financial institutions, regardless of their location or size, are expected to adhere to strict compliance standards to prevent illicit financial activities and protect the integrity of the U.S. financial system.

For more detailed information on the specific violations and underlying causes, you can refer to the Consent Order between FinCEN and Bancrédito provided by FinCEN.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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