CARACAS (Reuters) – U.S. sanctions on Venezuela have 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.
The development will prevent the island’s offshore banks, several of which are owned by citizens of crisis-stricken Venezuela, from opening accounts with the Fed that give them direct access to the U.S. financial system.
Banks - Puerto - Rico - Accounts - Fed
Offshore banks in Puerto Rico are able to open accounts with the Fed since the island is a U.S. territory. That gives them a competitive advantage over other offshore banking jurisdictions like the British Virgin Islands, which have to access the U.S. financial system through expensive third-party correspondent banks.
But in a previously unreported Feb. 27 letter, the New York Fed said it had halted approval of new accounts for Puerto Rican offshore banks and other financial institutions “in light of recent events, including the expansion of U.S. economic sanctions relating to Venezuela.”
Requirements - Opening - Accounts - Future
It plans stricter requirements for the opening of such accounts in the future, it said.
It did not give further details on why it was taking that step. But the move follows two Puerto Rican offshore banks that have accounts open with the New York Fed being mentioned in federal investigations into money laundering and sanctions evasion related to Venezuela.
Fed - Exposure - Anybody - David - Murray
“The Fed worries about its reputational exposure, just like anybody else does,” said David Murray, a vice president at the Washington-based Financial Integrity Network and a former Treasury Department official.
A spokeswoman for the New York Fed did not respond to requests for comment.
Decision - Puerto - Banks - Applications - Fed
The decision will only affect Puerto Rican banks that had pending applications with the Fed and will not affect the 17 of Puerto Rico’s 80 offshore banks that the Fed’s website shows already have Fedwire accounts. Reuters was unable to determine...
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One of the countries we liberated was Russia, too bad it seems to have cost us our liberty.