Saturday, May 2, 2015


This week's announcement, that a Venezuelan banking family had entered into an agreement to purchase Espirito Santo Bank, the troubled Miami subsidiary of the failed Portuguese giant, Banco Espirito Santo, leaves me with mixed feelings. Is it in the best interests of the American financial community ? I am afraid that I must answer no, for strictly compliance reasons.

Here is why the sale troubles me:

(1) Espirito Santo Bank has a history of repeated problems involving a lack of effective anti-money laundering controls, as well as Bank Secrecy Act violations, and the problems are not just in with United States; Take a look at the bank's issues in Brazil, and settlement of money laundering matters.

(2)  A large portion of the bank's primary customer base includes affluent Venezuelans, a country declared by the United States to represent a national security risk. Meaningful AML/CFT compliance does not exist in Venezuela, where the obscenely-rich Bolivarian elite, and their allies in government, can dictate the movement of drug profits, the proceeds of corruption, and even terrorist funding.

(3) If you look at the record, some Miami-area banks with absentee Venezuelan ownership have had money laundering problems, and much of that can be attributed to the overbearing influence of the owners, who have instructed management to exempt favored clients from the compliance process, with disastrous results, from an AML viewpoint. Since regulators generally choose merely to quietly fine bank offenders huge sums, rather than indict the individuals responsible in the banks, details of their egregious conduct never appear in mainstream media. If you follow the Miami banking scene, you know which banks I am referring to, but most Americans have no clue about who their banks' owners are.

(4) If the declared client base of Espirito Santo Bank consists of wealthy Latin Americans, from countries with both rampant tax evasion, as well as drug money laundering problems, whose purchase, for top dollar, of US real estate, is their stated goal, how is that a benefit to American citizens, who must now deal with inflated prices that may interfere with their ability to own real estate ? It should not be the policy of agencies of the United States Government to aid real estate speculation from abroad, as we know the consequences when such activities implode.

Is this not analogous to the Lebanese-Canadian bank situation, and if so, why not sell off the remaining skeleton of the bank's minimal assets (note that the sale is for only $10m) to an existing local financial institution, with US owners ? The mere fact that the announced sale involves a Venezuelan purchaser, who will only bring in more high-risk clients from that country, bothers me. Miami has enough AML/CFT issues on its plate in 2015; it does not need yet another bank, with foreign ownership, from an admittedly high-risk jurisdiction. It is in the best interests of compliance for regulators to decline to approve the sale, in my humble opinion.    

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