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Fri Apr 19, 2019, 02:30 PM

New York Fed cracks down on Puerto Rico banks following Venezuela sanctions

Source: Reuters

BUSINESS NEWS APRIL 18, 2019 / 4:43 PM / UPDATED 17 HOURS AGO

Exclusive: New York Fed cracks down on Puerto Rico banks following Venezuela sanctions

Luc Cohen, Corina Pons
8 MIN READ

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.

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.”

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Read more: https://www.reuters.com/article/us-venezuela-politics-puertorico-exclusi/exclusive-new-york-fed-cracks-down-on-puerto-rico-banks-following-venezuela-sanctions-idUSKCN1RU2EI

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