NY Fed Defeats Puerto Rican Bank's Appeal Over Venezuela-Linked Account Cutoff

The Federal Reserve Bank of New York successfully defeated an appeal by Banco San Juan Internacional (BSJI), a Puerto Rican lender, regarding the termination of its access to the U.S. central banking system. In a unanimous 3-0 decision, the 2nd U.S. Circuit Court of Appeals in Manhattan ruled that the Federal Reserve Act does not entitle non-member banks to a master account. The court affirmed that regional Federal Reserve banks possess the discretion to deny such access to promote financial stability and manage risks associated with sanctions and anti-money laundering compliance. BSJI had sued in 2023 after its eleven-year-old account was closed due to concerns over links to Venezuela and potential violations of U.S. sanctions. The bank argued it was targeted as part of a broader campaign against disfavored banking models. However, Circuit Judge Denny Chin stated that while Reserve Banks have precise powers for member banks, they may use the blunt instrument of denying access for non-members. The court found no evidence of discriminatory animus based on the bank's ownership by a Venezuelan national.