United States: Understanding The Rising Corruption, Sanctions And Money Laundering Risks Of Doing Business With Venezuela

Last Updated: November 29 2017
Article by Zachary Brez

Recent actions by the U.S. and other governments targeting the government of Venezuela significantly raise the legal and reputational risks of doing business, directly or indirectly, with Venezuelan counterparties, and warrant close attention by financial institutions, companies and investors, especially those operating in or with the energy industry. With careful planning, however, this complex set of Venezuela-related international risks can be effectively identified, assessed and managed.

The View from Washington

While developments in Venezuela have received less media attention than the crisis in North Korea, they continue to alarm U.S. policymakers. Specifically, U.S. policymakers are increasingly concerned about the domestic and regional implications of Venezuela's instability: a deepening humanitarian catastrophe, a steady degradation of Venezuela's democratic institutions, a regional refugee crisis and the security risks of a failed state in the Western Hemisphere, among other things. Because the Trump administration assesses that many Venezuelan government officials are involved and benefit from international criminal activity (e.g., narco-trafficking), including by the use of state resources, it has pursued a policy to increase pressure on President Nicolás Maduro and his inner circle while seeking to avert a Venezuelan collapse.

Venezuela-Related Developments

To implement this policy, and as a complement to U.S. and regional diplomatic efforts, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issued an advisory on September 20, 2017, identifying elevated corruption and money laundering risks associated with Venezuela.1 This followed the U.S. Department of the Treasury's Office of Foreign Assets Control's (OFAC) recent imposition of economic sanctions predominantly targeting transactions with the Venezuelan government and entities it owns or controls,2 the Canadian government's enactment of new measures targeting the Venezuelan government and threatened EU sanctions.

Corruption and Money Laundering

The FinCEN advisory determined that, based on information gathered from financial institutions, all Venezuelan government agencies and state-owned entities (SOEs) are potentially vulnerable to corruption and money laundering risks. FinCEN recommended that financial institutions, which are directly subject to FinCEN regulations, pay close attention to transactions that, directly or indirectly, involve the Venezuelan government or SOEs. U.S. investments and business in Venezuela also intersect with the Venezuelan government and affiliated entities, making this advice relevant also to the broader U.S. business community.

The advisory highlighted several illustrative red flags that financial institutions should be aware of when conducting transactions in Venezuela:

  • government contracts where money is directed to personal accounts or companies unrelated to the contract;
  • government contracts originating from shell corporations or accounts located outside of Venezuela;
  • suspect payments, such as cash deposits or invoices with higher than market rate prices; and
  • transactions involving real estate purchases in Florida or Texas.

Based on these risks, financial institutions and, more broadly, companies doing business related to the Venezuelan government and its affiliated entities, will want to take extra precautions that account for these identified risks.

Economic Sanctions

OFAC's new sanctions on Venezuela likewise target the Venezuelan government and SOEs, making it more difficult for them to access U.S. credit and capital. The sanctions generally prohibit transactions involving new "debt" (a term which OFAC interprets to encompass the extension of credit through payment terms) of the government of Venezuela with a maturity of greater than 30 days. For these purposes, the government of Venezuela includes any entity owned or controlled, or acting on behalf of, the government of Venezuela. With respect to Venezuelan government-owned oil company Petroleos De Venezuela (PdVSA), the maturity may not be longer than 90 days.

Otherwise, the expanded economic sanctions prohibit transactions and dealings related to the following:

  • new equity of the government of Venezuela;
  • purchase of securities from the government of Venezuela, other than new debt;
  • bonds issued by the government of Venezuela; and
  • dividend payments or other distribution of profits to the government of Venezuela from any entity owned or controlled, directly or indirectly, by the government of Venezuela.

Simultaneously, OFAC has issued four general licenses to authorize certain activities notwithstanding the new sanctions:

  • activities necessary to wind down existing contracts for 30 days after issuance of the new sanctions;
  • transactions where the only Venezuelan government entity involved is CITGO Holding, Inc., PdVSA's U.S. subsidiary;
  • dealings with a select list of bonds; and
  • engagement in new debt associated with agricultural commodities, medicine and medical devices, or replacement parts.

Key Takeaways

  • As U.S. policy aimed at deterring trade and investment makes it increasingly more difficult to do business with Venezuela, it will be all the more important for companies and financial institutions to understand the associated corruption, sanctions and money laundering risks. These risks are especially significant for financial institutions and those doing business in the energy industry.
  • Parties who wish to conduct business with Venezuelan counterparties — particularly with the government of Venezuela or SOEs — will want to conduct enhanced diligence and take steps to safeguard as necessary against funds inadvertently being provided or accepted that further corruption or money laundering. What diligence is due will vary depending upon the particular facts and circumstances.
  • Parties conducting business in Venezuela should carefully review both the identity of contractual counterparties and the terms of contracts and agreements to ensure compliance with the new sanctions, including with respect to payment terms which may be construed as the issuance of "debt."
  • By virtue of the changing circumstances, financial institutions, companies and investors conducting business in or with Venezuela should ensure appropriate procedures are in place, and actively implemented, to comply with anti-corruption, sanctions and anti-money laundering requirements.


1 Advisory on Widespread Public Corruption in Venezuela, Financial Crimes Enforcement Network (Sep. 20, 2017), available at https://www.fincen.gov/sites/default/files/advisory/2017-09-20/FinCEN%20Advisory%20FIN-2017-A006-508%20Compliant.pdf.

2 Exec. Order No. 13808, Imposing Additional Sanctions with Respect to the Situation in Venezuela, 82 Fed. Reg. 4155 (Aug. 29, 2017).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions