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A Puerto Rican bank has sued the New York Federal Reserve on 25th July for suspending their access to the US international banking system, for improperly cutting off the link with banks in Venezuela.
US sanctions on Venezuela prompted the New York Federal Reserve to press down on Puerto Rico’s $50 billion banking industry in 2019. These advancements make it impossible for offshore corporations to open accounts in the US financial system. Opening an account in the Federal Reserve provides access to the US financial system. Offshore companies can open an account in Puerto Rico directly with the Federal Reserve because it is a territory of the US. This gives them a competitive advantage compared to other companies, such as banks in the British Virgin Islands. They have to comply with jurisdictions through an expensive third-party correspondent.
Banco San Juan Internacional (BSJI) stated in the complaint that the Federal Reserve NY branch told them at the beginning of this year that their “Master Card” was suspended. The master card is the key for the customer to access the international and electronic banking system and it is terminated because of noncompliance with anti-money laundering (AML) and various US regulations. The bank representative requested the court to bar the Federal New York Reserve because without the master card, they, “cannot effectively function as a depository institution.”
BSJI stated, “it improved its compliance program during a previous 22-month suspension of its master account between 2019 and 2020 in the wake of a federal money laundering and sanctions evasion investigation into its 2016 and 2017 credit agreements with state oil company Petroleos de Venezuela. Improper targeting of BSJI because it was founded by a Venezuelan national more than 12 years ago … is, of course, patently unreasonable.”