FinCEN Warns Financial Institutions to Guard against Corrupt Venezuelan Money

On September 20, the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) issued an Advisory on Widespread Public Corruption in Venezuela, warning financial institutions of methods that Venezuelan government officials may be using to flow money related to corruption into the U.S.

The advisory alert provides financial red flags to assist financial institutions in identifying and reporting suspicious activities possibly related to corruption involving the Venezuelan government, Venezuelan officials, or Venezuelan state-owned enterprises (SOEs). The alert gives examples of activities which may be indicative of Venezuelan corruption, such as abusive Venezuelan government contracts, wire transfers from shell corporations, and certain real estate purchases in South Florida and Houston, Texas.

Financial Sanctions Similar to Russia Sectoral Sanctions

As previously reported, on August 25 President Trump issued an Executive Order prohibiting U.S. companies from dealing in new debt with the Government of Venezuela and Petróleos de Venezuela (PDVSA) for a maturity of more than 30 and 90 days, respectively. In a new development, on October 3, OFAC published an FAQ explaining what constitutes “profit” for the purposes of Subsection 1(a)(vi) of the E.O.

These new sanctions against Venezuela resemble the U.S. sectoral sanctions on Russian energy and finance sectors issued by OFAC in July 2014. Of particular importance, both sets of sanctions define “new debt” broadly, including, for example, extensions of credit. The new financial sanctions would also require U.S. companies to conduct further due diligence to identify Venezuelan customers that are owned 50 percent or more by either the Government of Venezuela or PDVSA.

For more details on the E.O. issued by President Trump on August 24, see Crowell & Moring’s Client Alert.

Canada Sanctions

On September 5, Canada issued Special Economic Measures Regulations on Venezuela, imposing targeted sanctions against 40 Venezuelan officials and individuals. The list includes most of the names that the U.S. Government has added as Specially Designated Nationals (SDNs).

In view of the escalated sanctions on Venezuela, companies doing business with Venezuelan government agencies or SOEs should monitor developments relating to possible future measures by the U.S. and/or other countries against Venezuela.

For more information, contact: Cari Stinebower, Jeff Snyder, Dj Wolff, Eduardo Mathison

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Photo of Dj Wolff Dj Wolff

David (Dj) Wolff is the co-chair of Crowell & Moring’s International Trade Group and a director with Crowell Global Advisors, the firm’s trade policy affiliate.

At Crowell & Moring, he serves on the steering committee for the International Trade Group, where his practice

David (Dj) Wolff is the co-chair of Crowell & Moring’s International Trade Group and a director with Crowell Global Advisors, the firm’s trade policy affiliate.

At Crowell & Moring, he serves on the steering committee for the International Trade Group, where his practice focuses on all aspects of compliance with U.S. economic sanctions, including day-to-day compliance guidance, developing compliance programs, responding to government inquiries, conducting internal investigations, and representation during civil and criminal enforcement proceedings. Dj works regularly with non-U.S. clients, both in Europe and Asia, to evaluate the jurisdictional reach of U.S. sanction authorities to their global operations, identify and manage the potential conflict of laws that can result from that reach, as well as to support client’s design, implementation, and evaluation of a corresponding risk-based sanctions compliance program. Dj also regularly leads teams in diligence efforts on trade and related regulatory areas on behalf of his U.S. and non-U.S. clients in the M&A arena, having successfully closed more than 30 deals with an aggregate valuation of several billion dollars over the last 18 months.

Dj is ranked by Chambers USA in International Trade: Export Controls & Economic Sanctions. He has previously been recognized by Law360 as a Rising Star in International Trade (2020), by The National Law Journal as a “DC Rising Star” (2019), by Who’s Who Legal: Investigations as a “Future Leader” (2018 and 2019), Acritas Star as an Acritas Stars Independently Rated Lawyers (2019), by Global Investigations Review as one of the “40 under 40” in Investigations internationally (2017), and WorldECR as one of the five finalists for the WorldECR Young Practitioner of the Year award (2016).