Grupo Aval In Colombia Purchases Multibank In Panama Ending Cuba Transactions For Home BancShares In Arkansas
/From Grupo Aval On 16 June 2020: “On May 25th, Banco de Bogotá, through its subsidiary Leasing Bogotá S.A. Panamá, acquired 96.6% of the ordinary shares of Multi Financial Group. As part of the acquisition process, MFG’s operation in Cuba was closed and as part of the transaction. Grupo Aval complies with OFAC regulations and doesn't have transactional relationships with Cuba.”
In 2015, the Office of Foreign Assets Control (OFAC) of the United States Department of the Treasury authorized Pompano Beach, Florida-based Stonegate Bank to have an account with Republic of Cuba government-operated Banco Internacional de Comercia SA (BICSA), a member of Republic of Cuba government-operated Grupo Nuevo Banca SA, created by Corporate Charter No. 49 on 29 October 1993 and commenced operation on 3 January 1994.
Stonegate Bank provides commercial operating accounts for the Embassy of the Republic of Cuba in Washington, DC and the Permanent Mission of the Republic of Cuba to the United Nations in New York City; the financial institution also handles other types of OFAC-authorized transactions.
In September 2017, Stonegate Bank was purchased by Conway, Arkansas-based Home BancShares (2019 assets approximately US$14 billion) through its Centennial Bank subsidiary.
The Obama Administration did not authorize BICSA under a general OFAC license or reportedly in the OFAC license issued to Stonegate Bank for it to have an account with Stonegate Bank, so Stonegate Bank had processed transactions for approximately eighty (80) customers on a regular basis through Panama City, Panama-based Multibank, which has dealings with the Republic of Cuba.
Absent bilateral direct correspondent banking accounts, the payment process for funds from the United States to the Republic of Cuba and from the Republic of Cuba to the United States remains triangular rather than a straight line- which would be more efficient, more secure, more transparent, more timely (same day versus two or more days), and less costly.
Grupo Aval Purchase Of Multibank
“Grupo Aval Acciones y Valores S.A. (“Grupo Aval”) is an issuer of securities in Colombia and in the United States. As such, it is subject to compliance with securities regulation in Colombia and applicable U.S. securities regulation. Grupo Aval is also subject to the inspection and supervision of the Superintendency of Financeas holding company of the Aval financial conglomerate.
On May 11, 2020 Grupo Aval informed that its subsidiary Banco de Bogotá (through its subsidiary Leasing Bogotá S.A. Panamá) has agreed to amend the purchase agreement for up to 100% of the outstanding common shares (the “SPA”) of Multi Financial Group, Inc. (“MFG”), parent company of Panamanian bank Multibank. The parties mutually agreed to amend the SPA after certain conditions precedent were not met in a timely manner before the originally scheduled closing on April 28, 2020. The transaction has obtained the required regulatory approvals and is now expected to close before the end of May, 2020. In addition to the amendment of the closing date of the transaction, the agreed price was reduced by 39%, from 1.3 times MFG’s Total Shareholders’ Equity at closing (which includes $110 million dollars represented in preferred shares) to approximately 0.85 times the estimated Total Shareholders’ Equity at closing (including the $110 million dollars in preferred shares). “
ABOUT GRUPO AVAL
“Grupo Avalis Colombia’s largest banking group, and through our BAC Credomatic operations it is also the largest and the most profitable banking group in Central America. Grupo Aval currently operates through four commercial banks in Colombia (Bancode Bogotá, Banco de Occidente, Banco Popular and Banco AV Villas). It manages pension and severance funds through the largest pension and severance fund manager in Colombia (Porvenir) and owns the largest merchant bank in Colombia (Corficolombiana), each of which Aval controls and consolidates into its results.“
From Stonegate Bank
On September 26, 2017, the Company completed the acquisition of all of the issued and outstanding shares of common stock of Stonegate Bank (“Stonegate”), and merged Stonegate into Centennial. The Company paid a purchase price to the Stonegate shareholders of approximately $792.4 million for the Stonegate acquisition. Under the terms of the merger agreement, shareholders of Stonegate received 30,863,658 shares of HBI common stock valued at approximately $742.3 million plus approximately $50.1 million in cash in exchange for all outstanding shares of Stonegate common stock. In addition, the holders of outstanding stock options of Stonegate received approximately $27.6 million in cash in connection with the cancellation of their options immediately before the acquisition closed, for a total transaction value of approximately $820.0 million. Including the effects of purchase accounting adjustments, as of acquisition date, Stonegate had approximately $2.89 billion in total assets, $2.37 billion in loans and $2.53 billion in customer deposits. Stonegate formerly operated its banking business from 24 locations in key Florida markets with significant presence in Broward and Sarasota counties. Through our acquisition and merger of Stonegate into Centennial, we maintain a customer relationship to handle the accounts for Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant to a special license granted to Stonegate by the U.S. Treasury Department’s Office of Foreign Assets Control in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate Bank established a correspondent banking relationship with Banco Internacional de Comercio, S.A. in Havana, Cuba. As of December 31, 2017, this correspondent banking relationship does not have a material impact to the Company’s financial position and results of operations.
United States Securities And Exchange Commission
Washington DC
Form 10-K
26 February 2020
Our banking relationships with the Cuban government and Banco Internacional de Comercia, S.A. (“BICSA”) may increase our compliance risk and compliance costs.
U.S. persons, including U.S. banks, are restricted in their ability to establish relationships and engage in transactions with Cuba and Cuban persons pursuant to the existing U.S. embargo and the Cuban Assets Control Regulations. However, as a result of our acquisition of Stonegate Bank in 2017, we maintain a customer relationship to handle the accounts for Cuba’s diplomatic missions at the United Nations and for the Cuban Interests Section (now the Cuban Embassy) in Washington, D.C. This relationship was established in May 2015 pursuant to a special license granted to Stonegate Bank by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) in connection with the reestablishment of diplomatic relations between the U.S. and Cuba. In July 2015, Stonegate Bank established a correspondent banking relationship with Banco Internacional de Comercio, S.A. (“BICSA”) in Havana, Cuba.
Cross-border correspondent banking relationships pose unique risks because they create situations in which a U.S. financial institution will be handling funds from a foreign financial institution whose customers may not be transparent to the U.S. financial institution. Moreover, Cuban financial institutions are not subject to the same or similar regulatory guidelines as U.S. banks; therefore, these foreign institutions may pose a higher money laundering risk to their respective U.S. bank correspondent(s). Investigations have determined that, in the past, foreign correspondent accounts have been used by drug traffickers and other criminal elements to launder funds. Shell companies are sometimes used in the layering process to hide the true ownership of accounts at foreign correspondent financial institutions. Because of the large amount of funds, multiple transactions, and the U.S. bank’s potential lack of familiarity with a foreign correspondent financial institution’s customer, criminals and terrorists can more easily conceal the source and use of illicit funds. Consequently, we may have a higher risk of noncompliance with the Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”) rules due to our correspondent banking relationship with BICSA and will likely need to more closely monitor transactions related to correspondent accounts in Cuba, potentially resulting in increased compliance costs. Our failure to strictly adhere to the terms and requirements of our OFAC license or our failure to adequately manage our BSA/AML compliance risk in light of our correspondent banking relationship with BICSA could result in regulatory or other actions being taken against us, which could significantly increase our compliance costs and materially and adversely affect our results of operations.
Previous Analysis:
Home BancShares Reports On Its Risks Associated With Cuba-Related Banking Services (5 May 2018)
