FIN-2017-A006 September 20, 2017

Advisory on Widespread Public Corruption in Venezuela

Reports from financial institutions are critical to stopping, deterring, and preventing
the proceeds tied to suspected Venezuelan public corruption from moving through
the U.S. financial system.

The Financial Crimes Enforcement Network (FinCEN) is issuing

This Advisory should be this advisory to alert financial institutions of widespread public
shared with: corruption in Venezuela and the methods Venezuelan senior
• Private Banking Units
political figures (and their associates and front persons) may
use to move and hide corruption proceeds.1 This advisory
• Chief Risk Officers
also provides financial red flags to assist in identifying and
• Chief Compliance Officers reporting to FinCEN suspicious activity that may be indicative
• AML/BSA Analysts of Venezuelan corruption, including the abuse of Venezuelan
• Sanctions Analysts government contracts, wire transfers from shell corporations,
and real estate purchases in the South Florida and Houston,
• Legal Departments
Texas regions.

Awareness of money laundering schemes used by corrupt

Venezuelan officials may help financial institutions (1) differentiate between illicit and legitimate
transactions, and (2) identify and report transactions involving suspected corruption proceeds
being held or moved by their customers, including through their private and correspondent
banking relationships.

Consistent with a risk-based approach, however, financial institutions should be aware that normal
business and other transactions involving Venezuelan nationals and businesses do not necessarily
represent the same risk as transactions and relationships identified as being connected to the
Venezuelan government, Venezuelan officials, and Venezuelan state-owned enterprises (SOEs)
involved in public corruption that exhibit the red flags below or other similar indicia.

1. “The term ‘senior foreign political figure’ means a current or former senior official in the executive, legislative,
administrative, military or judicial branches of a foreign government (whether elected or not); a senior official
of a major foreign political party; or a senior executive of a foreign government-owned commercial enterprise; a
corporation, business, or other entity that has been formed by, or for the benefit of, any such individual; an immediate
family members of any such individual; and a person who is widely and publicly known (or is actually known by the
relevant covered financial institution) to be a close associate of such individual. For the purposes of this definition,
‘senior official or executive’ means an individual with substantial authority over policy, operations, or the use of
government-owned resources and ‘immediate family member’ means spouses, parents, siblings, children and a
spouse’s parents and siblings.” 31 CFR § 1010.605(p). See also 31 CFR § 1010.620.

1
 F I N C E N A D V I S O R Y

Public Corruption in Venezuela

Venezuela faces severe economic and political circumstances due to the rupture of democratic and
constitutional order by the government and policy choices. Endemic corruption, such as that seen
in Venezuela, can further damage its economic growth and stability. Such corruption, particularly
related to government contracts and resources, can also deprive populations of their wealth;
interfere with efforts to promote economic development; discourage private investment; and foster
a climate where financial crime and other forms of lawlessness can thrive.

In recent years, financial institutions have reported to FinCEN their suspicions regarding many
transactions suspected of being linked to Venezuelan public corruption, including government
contracts. Based on this reporting and other information, all Venezuelan government agencies
and bodies, including SOEs, appear vulnerable to public corruption and money laundering. The
Venezuelan government appears to use its control over large parts of the economy to generate
significant wealth for government officials and SOE executives, their families, and associates. In this
regard, there is a high risk of corruption involving Venezuelan government officials and employees at
all levels, including those managing or working at Venezuelan SOEs.

Recent Sanctions Actions

On February 13, 2017, the U.S. Department of the Treasury’s Office of Foreign Assets Control
(OFAC) designated Venezuelan Vice President Tareck El Aissami (El Aissami) for playing a
significant role in international narcotics trafficking pursuant to the Foreign Narcotics Kingpin
Designation Act. On the same day, OFAC also designated his front man, Samark Lopez Bello, for
materially assisting El Aissami and acting on his behalf.2 Their designation disrupted their ability
to launder illicit proceeds, and hundreds of millions in assets associated with Lopez Bello have
since been blocked. On March 8, 2015, the President of the United States issued Executive Order
(E.O.) 13692 which blocks property and suspends entry of certain persons contributing to the
situation in Venezuela. E.O. 13692 authorizes the Secretary of the Treasury to designate persons,
inter alia, involved in public corruption by senior officials within the Government of Venezuela or
persons who have materially assisted, sponsored, or provided financial, material, or technological
support for, or goods or services to or in support of, such designated persons. On August 25, 2017,
the President of the United States issued E.O. 13808 imposing additional sanctions prohibiting
certain debt, equity, and profit and dividend disbursement activities with the Government of
Venezuela and Venezuelan state-owned oil company, Petroleos de Venezuela, S.A. (PDVSA).3

The OFAC designations increase the likelihood that other non-designated Venezuelan senior
political figures may seek to protect their assets, including those that are likely to be associated
with political corruption, to avoid potential future blocking actions.

2. See “Treasury Sanctions Prominent Venezuelan Drug Trafficker Tareck El Aissami and His Primary Frontman Samark
Lopez Bello” (February 13, 2017).
3. See https://www.whitehouse.gov/the-press-office/2017/08/25/presidential-executive-order-imposing-sanctions-respect-
situation.

2
 F I N C E N A D V I S O R Y

Venezuelan Government Corruption – Red Flags

Venezuelan Government Agencies and State-Owned Enterprises

Transactions involving Venezuelan government agencies and SOEs, particularly those involving
government contracts, can potentially be used as vehicles to move, launder, and conceal embezzled
corruption proceeds. SOEs (as well as their officials) may also try to use the U.S. financial system
to move or hide proceeds of public corruption. Among the SOEs referenced in OFAC’s recent
designations related to Venezuela are the National Center for Foreign Commerce (CENCOEX),
Suministros Venezolanos Industriales, CA (SUVINCA), the Foreign Trade Bank (BANCOEX),
the National Telephone Company (CANTV), the National Electric Corporation (CORPELEC),
Venezuelan Economic and Social Bank (BANDES), and similar state-controlled entities. As law
enforcement and financial institutions increase scrutiny of transactions involving Venezuelan SOEs,
corrupt officials may try to channel illicit proceeds through lesser-known or newly-created SOEs or
affiliated enterprises.

The Role of Currency Controls

Currency controls in Venezuela limit the supply of U.S. dollars for most economic activities,
which encourages the demand for foreign currency and smuggled goods in the parallel market.
Although illegal, Venezuela’s parallel market is a highly profitable business for those with regime
connections that enable them to access inexpensive dollars and goods.4 This parallel market relies
upon unregulated brokers, whose clients often include criminals who integrate illicit proceeds
into the legal economy. Venezuelan officials who receive preferential access to U.S. dollars at the
more favorable, official exchange rate, also exploit the multi-tier exchange rate system for profit.

The red flags noted below, which are derived from information available to FinCEN (including
suspicious activity reporting), published information associated with OFAC designations, and other
public reporting, may help financial institutions identify suspected schemes by corrupt officials,
their family members, and associates to channel corruption proceeds, often involving government
contracts or resources, through transactions involving Venezuelan SOEs and subsidiaries:

Government Contracts: Corrupt officials may use contracts with the Venezuelan government as
vehicles to embezzle funds and receive bribes. In this regard, some financial red flags can include:

4. See Banco Central de Venezuela. Law against Illicit Trades, Chapter III, Art.9.

3
 F I N C E N A D V I S O R Y

Members of the regime and their allies direct government contracts to their associated companies to
import goods and obtain approval from the Venezuelan Corporation of Foreign Trade (CORPOVEX) for
foreign-domiciled companies—often shell companies—to participate in the import activity.5

In addition, other financial red flags observed in transactions suspected of involving Venezuelan
government corruption include:

5. For more information on CORPOVEX, see http://www.corpovex.gob.ve/quienes-somos-2/.

4
 F I N C E N A D V I S O R Y

Reminder of Regulatory Obligations for U.S.

Financial Institutions
FinCEN is providing the information in this advisory to assist U.S. financial institutions in
meeting their due diligence obligations that may apply to activity involving certain Venezuelan
persons. To best meet these obligations, financial institutions should generally be aware of
public reports of high-level corruption associated with senior Venezuelan foreign political
figures, their family members, associates, or associated legal entities or arrangements. Financial
institutions should assess the risk for laundering of the proceeds of public corruption associated
with specific particular customers and transactions. Financial institutions also should be aware
that OFAC has designated (and provided related guidance on) several Venezuelan persons and
entities located in or related to Venezuela.6

Consistent with existing regulatory obligations, financial institutions should take reasonable,
risk-based steps to identify and limit any exposure they may have to funds and other assets
associated with Venezuelan public corruption. Such reasonable steps should not, however,
put into question a financial institution’s ability to maintain or continue otherwise appropriate
relationships with customers or other financial institutions, and should not be used as the
basis to engage in wholesale or indiscriminate de-risking of any class of customers or financial
institutions. FinCEN also reminds financial institutions of previous interagency guidance on
providing services to foreign embassies, consulates, and missions.7

Enhanced Due Diligence Obligations for Private Bank Accounts

Under section 312 of the USA PATRIOT Act (31 U.S.C. § 5318(i)), U.S. financial institutions
have regulatory obligations to apply enhanced scrutiny to private banking accounts held by, or
on behalf of, senior foreign political figures and to monitor transactions that could potentially
represent misappropriated or diverted state assets, the proceeds of bribery or other illegal
payments, or other public corruption proceeds.8

6. See https://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20170518.aspx. For more

information on OFAC’s sanctions related to Venezuela,
see https://www.treasury.gov/resource-center/sanctions/Programs/Pages/venezuela.aspx.
7. See Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Financial Crimes
Enforcement Network, National Credit Union Administration, Office of the Comptroller of the Currency, and
Office of Thrift Supervision, “Interagency Advisory: Guidance on Accepting Accounts from Foreign Embassies,
Consulates, and Missions,” March 24, 2011 and Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, Financial Crimes Enforcement Network, National Credit Union Administration, Office of
the Comptroller of the Currency, and Office of Thrift Supervision, “Interagency Advisory: Guidance on Accepting
Accounts from Foreign Governments, Foreign Embassies, and Foreign Political Figures,” June 15, 2004.
8. For FinCEN’s implementing regulations see 31 CFR § 1010.620 and 1010.210 as further proscribed in 31 CFR §
1020.210, 1021.210, 1022.210, 1023.210, 1024.210, 1025.210, 1026.210, 1027.210, 1028,210, 1029.210, and 1030.210

5
 F I N C E N A D V I S O R Y

FinCEN’s regulations implementing Section 312 require a written due diligence program for
private banking accounts held for non-U.S. persons that is designed to detect and report any
known or suspected money laundering or other suspicious activity.9 Accordingly, covered
financial institutions maintaining private banking accounts for senior foreign political figures
are required to apply enhanced scrutiny of such accounts to detect and report transactions that
may involve the proceeds of foreign corruption.10

General Obligations for Correspondent Account Due Diligence and Anti-

Money Laundering (AML) Programs
U.S. financial institutions must comply with their general due diligence obligations under 31
CFR § 1010.610(a) and their AML program requirements under 31 U.S.C. § 5318(h) and 31 CFR
§ 1010.210. In addition, as required under 31 CFR § 1010.610(a), covered financial institutions
should ensure that their due diligence programs, which address correspondent accounts
maintained for foreign financial institutions, include appropriate, specific, risk-based, and, where
necessary, enhanced policies, procedures, and controls that are reasonably designed to detect
and report known or suspected money laundering activity conducted through or involving any
correspondent account established, maintained, administered, or managed in the United States.

Suspicious Activity Reporting

A financial institution is required to file a suspicious activity report (SAR) if it knows, suspects,
or has reason to suspect a transaction conducted or attempted by, at, or through the financial
institution involves funds derived from illegal activity, or attempts to disguise funds derived
from illegal activity; is designed to evade regulations promulgated under the Bank Secrecy
Act (BSA); lacks a business or apparent lawful purpose; or involves the use of the financial
institution to facilitate criminal activity, including foreign corruption.11

Additional SAR Reporting Guidance on Senior Foreign Political Figures

In April 2008, FinCEN issued Guidance to assist financial institutions with reporting suspicious
activity regarding proceeds of foreign corruption.12 A related FinCEN SAR Activity Review,
which focused on foreign political corruption, also discusses indicators of transactions that may
be related to proceeds of foreign corruption.13 Financial institutions may find this Guidance
and the SAR Activity Review useful in assisting with suspicious activity monitoring and due
diligence requirements related to senior foreign political figures.

9. See 31 CFR § 1010.620(a-b). The definition of “covered financial institution” is found in 31 CFR § 1010.605(e). The
definition of “private banking account” is found in 31 CFR § 1010.605(m). The definition for the term “non-U.S.
person” is found in 31 CFR § 1010.605(h).
10. 31 CFR § 1010.620(c).
11. See generally 31 CFR § 1020.320, 1021.320, 1022.320, 1023.320, 1024.320, 1025.320, 1026.320, 1029.320, and 1030.320.
12. See FinCEN Guidance FIN-2008-G005: “Guidance to Financial Institutions on Filing Suspicious Activity Reports
Regarding the Proceeds of Foreign Corruption,” (April 2008).
13. See Bank Secrecy Act Advisory Group “Focus: Foreign Corruption,” SAR Activity Review, Issue 19, May 2011,
particularly pages 29-69.

6
 F I N C E N A D V I S O R Y

SAR Filing Instructions

When filing a SAR, financial institutions should provide all pertinent available information in
the SAR form and narrative. FinCEN further requests that financial institutions select SAR
field 35(l) (Suspected Public/Private Corruption (Foreign)) and reference this advisory by
including the key term:

“Venezuelan Corruption”

in the SAR narrative and in SAR field 35(z) (Other Suspicious Activity-Other) to indicate
a connection between the suspicious activity being reported and the persons and activities
highlighted in this advisory.

SAR reporting, in conjunction with effective implementation of due diligence requirements and
OFAC obligations by financial institutions, has been crucial to identifying money laundering
and other financial crimes associated with foreign and domestic political corruption. SAR
reporting is consistently beneficial and critical to FinCEN and U.S. law enforcement analytical
and investigative efforts, OFAC designation efforts, and the overall security and stability of the
U.S. financial system.14

For Further Information

Additional questions or comments regarding the contents of this advisory should be addressed
to the FinCEN Resource Center at FRC@fincen.gov. Financial institutions wanting to report
suspicious transactions that may potentially relate to terrorist activity should call the Financial
Institutions Toll-Free Hotline at (866) 556-3974 (7 days a week, 24 hours a day). The purpose of
the hotline is to expedite the delivery of this information to law enforcement. Financial institutions
should immediately report any imminent threat to local-area law enforcement officials.

FinCEN’s mission is to safeguard the financial system from illicit use and
combat money laundering and promote national security through the
collection, analysis, and dissemination of financial intelligence and
strategic use of financial authorities.

14. For example case studies, see SAR Activity Review, Issue 19, beginning on page 25 and Law Enforcement Case
Examples.