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.

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

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