Puerto Rico’s Bank of San Juan Internacional Inc. has agreed to pay US$1 million to resolve a federal investigation into alleged money laundering involving PdVSA, Venezuela’s state oil company.
As part of the resolution, the US Justice Department, which brokered the deal agreed to return US$53 million in seized funds to the bank and end its investigation into the bank and its officials. Prosecutors alleged that Bank of San Juan Internacional laundered millions of dollars related to transactions and loan agreements with Venezuela’s state-owned oil giant, Petróleos de Venezuela SA. (PdVSA).
The US imposed sanctions on PdVSA in January 2019 in an attempt to cut off an important revenue stream and cripple the government of cripple the government of Venezuelan President, Nicolás Maduro. The resolution, announced yesterday followed a civil forfeiture of tens of millions of dollars and close to five months of civil litigation between the bank and federal prosecutors.
“From the beginning, the bank and its officials maintained that they always acted in good faith and in accordance with the law,” Bank of San Juan said in a statement. The bank added that it looks forward to restoring confidence and continuing to be a model for other international banking entities in Puerto Rico.
Efforts by the Wall Street Journal to reach PdVSA for comment were successful. Bank of San Juan agreed to lend PdVSA $519 million in April 2017, according to a complaint filed in September.
Prosecutors alleged that the bank misrepresented to regulators which accounts the repayment from PdVSA was deposited into. They pointed to evidence indicating that the bank laundered more than $73.8 million in international wire transfers from PdVSA.
Prosecutors claimed the transfers were the proceeds of a crime and seized about $53 million from Bank of San Juan. The funds were held in accounts at Merrill Lynch and at the Federal Reserve Bank of New York, according to the complaint. Federal Bureau of Investigation agents also raided the bank’s offices in February 2019.
The Justice Department said the bank fully cooperated with the investigation and has improved anti-money-laundering compliance and strengthened its governance, risk management and control procedures. US sanctions on Venezuela led the New York Federal Reserve to crack down on Puerto Rico’s $50 billion offshore banking industry, according to four sources and a document seen by Reuters.
Sixteen of Puerto Rico’s 80 offshore banking and financial services firms are owned by Venezuelan individuals or companies, according to a Reuters review of their websites, corporate registry records, and directors’ LinkedIn pages and personal websites. Several marketed directly to Venezuelan clients, or had past deals with the Venezuelan government, while 12 of the 16 had Fedwire accounts, according to the Federal Reserve’s website.