Updated Advisory on Widespread Public Corruption in Venezuela (FinCEN Advisory FIN-2019-A002)

FIN-2019-A002 May 3, 2019
Updated Advisory on Widespread Public Corruption in Venezuela Financial institutions' reports are fundamental to stopping, curbing, and preventing funds linked to alleged Venezuelan public corruption from moving through the financial system and perpetuating the humanitarian crisis of the Venezuelan people.
This advisory should be shared with:

• Private banking units
• Risk Directors
• Compliance Directors
• AML/BSA Analysts
• Sanctions Analysts
• Legal Departments
  The Financial Crimes Enforcement Network (FinCEN) issues this update to the "Advisory on Widespread Public Corruption in Venezuela," issued by FinCEN on September 20, 2017¹

1. See FIN-2017-A006, "Advisory on Widespread Public Corruption in Venezuela," dated September 20, 2017.
   ("Advisory Venezuela 2017") to alert financial institutions to the ongoing widespread public corruption in Venezuela under the Nicolás Maduro regime, which the United States Government considers illegitimate. It also alerts financial institutions to additional methods used by corrupt Venezuelan senior foreign political figures²
2. "Senior foreign political figure" means a person who is or has been (whether elected or not) in a position of prominence in the executive, legislative, administrative, military, or judicial branches of a foreign government; a senior official of a major foreign political party; or a senior executive of a commercial enterprise that is owned by a foreign government; a company, business, or other entity that has been formed by or for the benefit of any such person; an immediate family member of any such person; and a person widely and publicly known (or in fact known by the financial institution in question) as a close associate of such person. For purposes of this definition, "senior official or executive" means a person with considerable authority over the policy, operations, or use of government resources, and "immediate family member" means spouses, parents, siblings, and children, as well as the parents and siblings of a spouse." § 1010.605(p) of Title 31 of the Code of Federal Regulations (CFR). See also § 1010.620 of Title 31 CFR.
   (and their associates, family members, and front persons) to move and conceal corruption proceeds—money stolen from the Venezuelan people—and contribute to the precarious humanitarian situation in Venezuela, which includes, among other things, famine, human rights abuses, lack of medicines or medical care, and the separation of children and the elderly from their families because they cannot care for them.³
3. See FinCEN Advisory FIN-2018-A003, "Advisory on Human Rights Abuses Enabled by Corrupt Senior Foreign Political Figures and Their Financial Facilitators," dated June 12, 2018 (highlighting the connection between senior foreign political figures and their sponsorship of human rights abuses).

In principal, these updates to the Advisory Venezuela 2017:
(1) renew the description of public corruption in Venezuela; (2) add information on examples of measures taken by the United States Government; (3) describe how corrupt Venezuelan senior political figures abuse the food program administered by the Venezuelan Government by channeling overvalued and unbid contracts to co-conspirators who use trade-based money laundering (TBML) schemes by over-invoicing, which may include: i) shell companies⁴
4. Shell companies are operating businesses that combine illicit revenues with profits from legitimate operations, concealing the source, ownership, and control of illegal funds. When a company is used as a shell to deposit, circulate, or use illicit funds, it may be difficult for the bank holding the account to know that the company's banking activity includes money laundering. See U.S. Department of the Treasury, National Money Laundering Assessment 2015, p. 43.
or ghost companies⁵
5. Ghost companies are non-publicly traded corporations, limited liability companies (LLCs), and trusts that generally lack a physical presence (other than a mailing address) and generate little or no independent economic value. Most ghost companies are typically formed by individuals and firms for legitimate purposes, such as holding shares or intangible assets of another commercial entity, or facilitating domestic and cross-border currency and asset transfers, as well as corporate mergers. See FinCEN Alert FIN-2006-G014, "Potential Money Laundering Risks Related to Shell Companies," dated November 9, 2006.
to diversify and obscure financial transactions; ii) accounts denominated in foreign currencies other than the dollar; and iii) nested accounts, in an attempt to evade sanctions and anti-money laundering/counter-financing of terrorism (AML/CFT) controls; (4) the attempt to use digital assets, specifically digital currencies, to evade sanctions and AML/CFT controls by the illegitimate and corrupt Nicolás Maduro regime; and (5) provide updated red flags to help identify and report to FinCEN suspicious activities that may be indicative of corruption by Venezuelan senior political figures, such as: i) abuse of Venezuelan government contracts, particularly those involving unofficial government accounts located in jurisdictions outside Venezuela; and ii) transactions to purchase high-value assets, such as aircraft and real estate⁶
6. See FinCEN Advisory FIN-2017-A003, "Advisory to Financial Institutions and Real Estate Firms and Professionals," dated August 22, 2017 (describing certain money laundering risks in the real estate sector).
, that do not correspond to the official salaries of the corrupt Venezuelan senior political figures making the purchases.
Knowledge of the money laundering schemes (and their related crimes and misconduct) used by corrupt Venezuelan senior political figures can help financial institutions differentiate between illicit and legitimate transactions. It can also help financial institutions identify and report transactions involving alleged corruption proceeds that their clients are holding or circulating, even through their private and correspondent banking relationships.

Consistent with a risk-based approach, financial institutions should be aware that normal business transactions and others involving Venezuelan companies and citizens do not necessarily pose the same high risk as transactions and relationships identified as linked to the illegitimate Maduro regime or to corrupt Venezuelan senior political figures and state-owned enterprises (SOEs) exhibiting the following red flags or other similar indicators of public corruption. Public Corruption in Venezuela On January 23, 2019, the United States recognized Juan Guaidó as Interim President of Venezuela and the legitimate leader of the Venezuelan people. The illegitimate Maduro regime has committed brazen acts of corruption through state-owned enterprises (SOEs) and third-party transnationals. Endemic corruption, as perceived in Venezuela, hinders economic growth and stability. Such corruption, particularly that related to government contracts and resources, deprives the population of its wealth, interferes with efforts to foster economic development, discourages private investment, destroys democratic institutions, and creates an environment in which financial crimes and other forms of anarchy can flourish. Financial institutions have reported to FinCEN an intensification of activities with alleged links to Venezuelan public corruption, such as those involving government contracts. Based on these reports and other information, FinCEN's assessment is that all Venezuelan government departments and agencies, including SOEs, appear vulnerable to public corruption, money laundering, and other financial crimes. The illegitimate Maduro regime appears to use its control over large segments of the economy to generate significant wealth for senior political figures and SOE executives, as well as for their families and associates. In this regard, FinCEN's assessment is that there is a high risk of corruption involving senior political figures of the illegitimate Maduro regime and employees at all levels, including those who manage or work in SOEs. Examples of Measures Taken by the United States Government
1. Sanctions and Related Measures
Several presidential executive orders (E.O.) address the situation in Venezuela, including:

• Executive Order 13692 authorizes the Secretary of the Treasury to designate, among others, persons involved in acts of public corruption by senior Venezuelan government officials, or persons who have financially assisted, sponsored, provided financial, material, or technological support, or goods or services, for or in support of such designated principal actors.⁷
  7. Executive Order 13692 (March 8, 2015).

• Executive Order 13808 imposes additional sanctions that prohibit certain activities related to debt, capital, and the disbursement of profits and dividends in connection with the Government of Venezuela, including the Venezuelan state-owned oil company Petróleos de Venezuela, S.A. (PDVSA).⁸

8. Executive Order 13808 (August 25, 2017).

• Executive Order 13827 prohibits a U.S. person or a person operating within the United States from engaging in any transaction related to providing funds and other dealings in any digital currency, digital coin, or digital "token" issued by, for, or on behalf of the Government of Venezuela, including the "petro."⁹

9. Executive Order 13827 (March 19, 2018). See also OFAC's Frequently Asked Questions (FAQs) Index.

• Executive Order 13835 prohibits certain transactions, whether by a U.S. person or within the United States, related to any debt owed to the Government of Venezuela or any equity interest in an entity in which the Government of Venezuela holds a 50 percent or greater ownership interest.¹⁰

10. Executive Order 13835 (May 21, 2018).

• Executive Order 13850 authorizes the imposition of interdiction sanctions against persons determined, among other things, to: i) operate in the gold sector, or any other sector, of the Venezuelan economy, as determined by the Secretary of the Treasury in consultation with the Secretary of State; ii) be responsible for, or complicit in, or have directly or indirectly participated in, any transaction involving deceptive or corrupt practices and the Government of Venezuela, or projects or programs administered by it, or be an immediate adult family member of such a person.¹¹

11. Executive Order 13850 (November 1, 2018).
    The Secretary of the Treasury, in consultation with the U.S. Secretary of State, determined: i) on January 28, 2019, that persons operating in Venezuela's petroleum sector may be subject to sanctions;¹²
12. Treasury Resource Center, "Issuance of a New Venezuela-related Executive Order and General Licenses; Venezuela-related Designation" (January 28, 2019).
    and ii) on March 22, 2019, that persons operating in Venezuela's financial sector may be subject to sanctions.¹³
13. Treasury Resource Center, "Treasury Sanctions BANDES, Venezuela's National Development Bank, and Subsidiaries, in Response to Illegal Arrest of Guaido Aide" (March 22, 2019).

• Executive Order 13857 modifies previous Venezuela-related executive orders to define the term "Government of Venezuela" to include the State and Government of Venezuela; any political subdivision, department, or agency thereof, including the Central Bank of Venezuela and PDVSA; any person subject to or controlled, directly or indirectly, by the foregoing; and any person who has acted or purported to act, directly or indirectly, on behalf of any of the foregoing, including as a member of the illegitimate Maduro regime.¹⁴

14. Executive Order 13857 (January 25, 2019).
    The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) administers the legal requirements related to sanctions. Complete information on OFAC sanctions is available at the OFAC Venezuela Sanctions Resource Center and the Recent Measures Taken by OFAC page.
    OFAC has designated, among others, the following persons and entities related to Venezuela:

• Nicolás Maduro Moros, the illegitimate former president of Venezuela.¹⁵

15. Treasury Resource Center, "Treasury Sanctions the President of Venezuela" (July 31, 2017).

• PDVSA, the Venezuelan state-owned oil company, and Venezuela's primary source of revenue and foreign exchange.¹⁶

16. Treasury Resource Center, "Treasury Sanctions Venezuela's State-Owned Oil Company Petroleos de Venezuela, S.A." (January 28, 2019). This designation underscored how the state-owned oil company was targeted for years of extortion and theft by government officials.¹⁷
17. Treasury Resource Center, "Treasury Sanctions Venezuela's State-Owned Oil Company Petroleos de Venezuela S.A." (January 28, 2019). See also relevant federal court cases mentioned in sections 2(A)(i) and 2(A)(ii) of "Examples of Measures Taken by the United States Government" below.

• Tareck El Aissami (El Aissami), the vice president of the illegitimate Maduro regime, for playing a significant role in international drug trafficking, pursuant to the Foreign Narcotics Kingpin Designation Act, as well as Samark López Bello, for financially assisting El Aissami and acting on his behalf.¹⁸

18. Treasury Resource Center, "Treasury Sanctions Prominent Venezuelan Drug Trafficker Tareck El Aissami and His Primary Frontman Samark Lopez Bello" (February 13, 2017). See also the Department of Justice press release, "Venezuelan Minister and Former Vice President Tareck Zaidan El Aissami Maddah Charged with Violations of the Foreign Narcotics Kingpin Designation Act" (March 8, 2019).

• The Venezuela Currency Exchange Network scheme, a network in which the Treasury targeted seven persons and 23 key entities involved in a corruption scheme designed to exploit the Venezuelan Government's currency exchange practices, which generated over $2.4 billion in corrupt profits.¹⁹

19. Treasury Resource Center, "Treasury Targets Venezuela Currency Exchange Network Scheme Generating Billions of Dollars for Corrupt Regime Insiders" (January 8, 2019). See also relevant federal court cases mentioned in sections 2(A)(i) and 2(B) of "Recent Measures Taken by the United States Government" below.

• The Economic and Social Development Bank of Venezuela (BANDES) and four additional financial institutions owned or controlled by it, to, among other things, operate in the financial sector of the Venezuelan economy.²⁰

20. Treasury Resource Center, "Treasury Sanctions BANDES, Venezuela's National Development Bank, and Subsidiaries, in Response to Illegal Arrest of Guaido Aide" (March 22, 2019).

• Evrofinancial Mosnarbank, a Moscow-based bank jointly owned by Russian and Venezuelan state-owned enterprises that financially assisted, sponsored, or provided financial, material, or technological support, goods, or services for or in support of PDVSA.²¹

21. Treasury Resource Center, "Treasury Sanctions Russia-based Bank Attempting to Circumvent U.S. Sanctions on Venezuela" (March 11, 2019). See also the relevant federal court case mentioned in section 2(A)(i) of "Recent Measures Taken by the United States Government" below. When the failed Venezuelan cryptocurrency, called "petro," was introduced in 2018, Evrofinancial Mosnarbank emerged as the leading international financial institution willing to finance it.²²
22. Treasury Resource Center, "Treasury Sanctions Russia-based Bank Attempting to Circumvent U.S. Sanctions on Venezuela" (March 11, 2019).

• The Central Bank of Venezuela, for operating in the financial sector of the Venezuelan economy.²³

23. Treasury Resource Center, "Treasury Sanctions Central Bank of Venezuela and Director of the Central Bank of Venezuela" (April 17, 2019).

In addition to the measures listed above, OFAC has announced other sanctions since FinCEN issued the 2017 Venezuela Advisory, including designations highlighting the corruption prevalent among Venezuelan senior political figures.²⁴
24. Additional information on OFAC sanctions is available at the OFAC Resource Center on Venezuela-related Sanctions and the Recent Measures Taken by OFAC page. Other OFAC sanctions imposed in relation to Venezuela since the 2017 Venezuela Advisory was issued include: On April 26, 2019, OFAC designated Jorge Alberto Arreaza Montserrat, Venezuela's Minister of Foreign Affairs, and Carol Bealexis Padilla de Arretureta as principal actors. On April 17, 2019, alongside the designation of the Central Bank of Venezuela, OFAC also designated Iliana Josefa Ruzza Terán as a principal actor. On April 12, 2019, the United States intensified pressure on Cuba to cease supporting the illegitimate Maduro regime by designating four companies operating in Venezuela's petroleum sector and identifying nine vessels as blocked property. On April 5, 2019, OFAC designated two companies operating in Venezuela's petroleum sector and identified 35 vessels as blocked property. On March 19, 2019, OFAC removed certain persons from the list and designated CVG Compañía General de Minería de Venezuela, C.A. ("Minerven") and its president, to target illicit gold operations underpinning the illegitimate Maduro regime. On March 1, 2019, OFAC designated six Venezuelan government officials linked to violence and obstruction of humanitarian aid delivery. On February 25, 2019, OFAC designated four officials allied to the Maduro regime. On February 15, 2019, OFAC designated five Maduro-aligned officials involved in acts of repression and corruption. On September 25, 2018, OFAC designated four members of Maduro's inner circle and targeted corruption proceeds found in the United States. On May 18, 2018, OFAC designated an influential former Venezuelan official and three individuals for being retired or serving officials, or for acting for or on behalf of designated principal actors. On March 19, 2018, OFAC designated four retired or serving Venezuelan government officials as part of the Treasury's ongoing effort to highlight the economic mismanagement and endemic corruption that have been defining characteristics of the illegitimate Maduro regime. On January 5, 2018, OFAC designated four high-ranking military officers linked to corruption and repression in Venezuela. On November 9, 2017, OFAC designated 10 retired or serving Venezuelan government officials, linked to the electoral process, media censorship, or corruption in government-administered food distribution programs in Venezuela.
The EO and OFAC designations increase the likelihood that other Venezuelan senior political figures of the illegitimate Maduro regime who have not been designated as principal actors will seek to protect their assets, including those likely linked to political corruption, to avoid potential future interdiction measures.
2. Recent Criminal Prosecutions Related to Venezuela
U.S. authorities have opened several criminal cases related to the c