When Lawyers Switch Sides on Their Own Client: The $15 Million Lesson of Bancrédito
A Bank That Played by the Rules—Until It Didn’t
Bancrédito International Bank & Trust was a small Puerto Rican bank with a special offshore license. Like all banks, it had to follow the Bank Secrecy Act (BSA) and anti-money-laundering (AML) rules: laws designed to catch shady transactions and make sure suspicious activity reports (SARs) are filed when money looks questionable
In 2020, Bancrédito’s lawyers—respected firms from San Juan and Miami—told regulators in writing that the bank’s compliance program was “adequate” and risk-based. They even stressed that filing SARs is a matter of judgment, not guesswork. In other words: the bank was doing what the law required.
Those lawyers helped negotiate a settlement with Puerto Rico’s banking watchdog, which ended with a slap on the wrist: a $97,000 fine and a plan for improvements. For a bank, that’s like paying a speeding ticket—not pleasant, but survivable.
The Plot Twist: Three Years Later
Fast forward to September 2023. Bancrédito, now in liquidation and run by a court-appointed receiver, faced FinCEN—the U.S. Treasury’s financial crimes unit. This time, the outcome was brutal: a $15 million penalty, one of the largest ever against a Puerto Rican bank of its size.
Worse, the bank—on the advice of those same law firms—admitted things that directly contradicted what those lawyers had said in 2020:
- That its AML program had “deteriorated over time.”
- That it “willfully” failed to report suspicious transactions, including more than $100 million in activity.
For context: under U.S. law, “willful” doesn’t mean evil intent. It can mean just reckless disregardor turning a blind eye. But it’s the difference between a $500 fine and a multi-million-dollar one. By admitting willfulness, Bancrédito signed its own financial death warrant.
How Legal Malpractice Works in Plain English
Across the U.S., suing your lawyer for malpractice means proving four things:
- Duty – The lawyer owed you competent, loyal representation.
- Breach – They fell short (bad advice, ignoring defenses, conflicted interests).
- Causation – Their bad advice caused the bad outcome.
- Damages – You lost real money as a result.
Bancrédito’s shareholder argues that no reasonable attorney would have told the bank to accept FinCEN’s terms—especially when their own prior opinions could have been used as a defense. By not raising those defenses, and by steering the bank into admissions they knew were questionable, the firms allegedly committed legal malpractice.
The “Conflict of Interest” Question
Here’s the awkward part: the best defense the bank had was “we relied on our lawyers.” That would have shown good faith, making “willful” hard to prove.
But raising that defense would mean admitting the lawyers might have been wrong in 2020. Instead of taking that risk, the lawsuit claims, the lawyers kept quiet—protecting themselves while sacrificing the bank.
In legal ethics, that’s a cardinal sin: your duty is to your client, not your own reputation. If true, this would be a textbook example of a conflict of interest.
The Receiver’s Role: Overstepping the Mandate?
When Bancrédito went into receivership, a private company was put in charge. Its job was simple: pay depositors and wind down the bank. Once all debts were cleared, any leftovers—like cash, art collections, or property—should go back to the owner
Instead, the receiver:
- Signed the $15 million FinCEN deal without consulting the shareholder.
- Allegedly kept or sold more than $22 million in art, even after depositors were paid.
- Refused to sue the law firms, dismissing the idea as “not in the bank’s interest.”
Critics call this administrative overreach—acting beyond what the law allows. Under Puerto Rican and U.S. law, agencies and their appointees can’t invent new rules on the fly or exceed their mandate. If they do, courts can step in.
Why This Story Matters to Everyday Readers
Most of us will never run a bank or face FinCEN. But this saga offers universal lessons:
- Consistency matters. If your lawyer tells regulators “everything’s fine” one year, and then helps you admit “everything fell apart” the next, something is wrong.
- Privilege belongs to the client. Legal advice is a shield for the client, not a safety blanket for the lawyer. You can waive it if it helps your defense.
- Guardians aren’t owners. A receiver, trustee, or manager is supposed to protect, not plunder. When they cross the line, the law has remedies
What’s Next
Bancrédito’s shareholder is suing the firms in Miami-Dade court, seeking at least $15 million plus costs and interest. If they win, it could set a national precedent: law firms that give compliance advice can’t later flip their story and escape accountability
The stakes go beyond Puerto Rico. In an era of aggressive AML enforcement, banks rely on lawyers to navigate a minefield of complex rules. If those lawyers switch sides—or put their own interests first—the fallout can be catastrophic.
And for everyone else? It’s a reminder: your lawyer’s job is to protect you, not themselves. When that balance tips, the consequences can be devastating
Sept 17, 2025
