FATF AML Deficiency List
US Dept of State Money Laundering assessment
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
International Narcotics Control Majors List
Non - Compliance with FATF MER Recommendations
Venezuela is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies
FATF Statement - 22 February 2013
The FATF welcomes Venezuela’s significant progress in improving its AML/CFT regime and notes that Venezuela has established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that the FATF had identified in October 2010. Venezuela is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Venezuela will work with the CFATF as it continues to address the full range of AML/CFT issues identified in its Mutual Evaluation Report.
Compliance with FATF Recommendations
The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Venezuela was undertaken by the Financial Action Task Force (FATF) in 2009. According to that Evaluation, Venezuela was deemed Compliant for 6 and Largely Compliant for 12 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 5 of the 6 Core Recommendations.
US Department of State Money Laundering assessment (INCSR)
Venezuela is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.
Venezuela is characterized by rampant illicit financial activity and endemic public corruption. The situation continued to worsen throughout 2019, particularly as the illegitimate regime refused to cede power to Interim President Juan Guaidó, who assumed his role on January 23, 2019. Nicolás Maduro and his regime rely on illicit activities – money laundering, drug trafficking, illegal mining, fraud, and public corruption – to fund their illegitimate rule.
Venezuela’s proximity to drug-producing countries and its status as a significant drug transit country, combined with practically nonexistent AML supervision, enforcement, and international cooperation, make for a jurisdiction riddled with money laundering and financial crimes. In 2019, in response to the deep economic crisis caused by its mismanagement, the regime relaxed foreign exchange controls, as well as price and import controls, leading to the rapid dollarization of the country and availability of goods for those who have dollars. However, the economy remains deeply unstable and hyperinflated, which is driving a complex humanitarian crisis. The dollarization of the economy and sudden increase in 2019 of the availability of cash dollars also raise concern regarding the source of so much cash and who has access. A robust black market continues to function in the porous border regions of Venezuela and Colombia, and to some extent Brazil, with the smuggling of gasoline.
On May 3, 2019, FinCEN issued an Updated Advisory on Widespread Public Corruption in Venezuela, which states the former Maduro regime has engaged in massive corruption through state-owned enterprises and offshore third-parties – money stolen from the Venezuelan people –
contributing to the dire humanitarian situation in Venezuela. FinCEN assesses that all Venezuelan regime agencies and bodies appear vulnerable to public corruption, money laundering, and other financial crimes, and the illegitimate Maduro regime uses its control of the economy to generate significant wealth for senior political figures and associates. On August 5,
2019, President Trump signed Executive Order 13884, “Blocking Property of the Government of Venezuela,” to address the continued usurpation of power by Maduro and persons affiliated with him, as well as human rights abuses and ongoing attempts to undermine Interim President Guaidó and the Venezuelan national assembly’s exercise of legitimate authority in Venezuela.
The US has imposed sanctions blocking property and suspending entry of certain persons and Petróleos de Venezuela, S.A. (PdVSA) contributing to the situation in Venezuela.
On 17th April, 2019, the Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed Sanctions on the Central Bank of Venezuela and Director of the Central Bank of Venezuela
On 1 February, 2019, the Department of the Treasury's Office of Foreign Assets Control (OFAC) issued two frequently asked questions (FAQs), and published amended General License 3B and amended General License 9A in connection with the January 28, 2019 designation of Petróleos de Venezuela, S.A. (PdVSA) pursuant to Executive Order 13850.
On 28 January, 2019, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Petróleos de Venezuela, S.A. (PdVSA) pursuant to Executive Order (E.O.) 13850 for operating in the oil sector of the Venezuelan economy.
On 21 May 2018, the Office of Foreign Assets Control (OFAC) issued a new Executive Order (Prohibiting Certain Additional Transactions with Respect to Venezuela). These transactions are as follows: -
All transactions related to, provision of financing for, and other dealings in the following by a United States person or within the United States are prohibited:
the purchase of any debt owed to the Government of Venezuela, including accounts receivable;
any debt owed to the Government of Venezuela that is pledged as collateral after the effective date of this order, including accounts receivable; and
the sale, transfer, assignment, or pledging as collateral by the Government of Venezuela of any equity interest in any entity in which the Government of Venezuela has a 50 percent or greater
On July 10, 2015, the Office of Foreign Assets Control (OFAC) issued regulations to implement the Venezuela Defense of Human Rights and Civil Society Act of 2014 (Public Law 113–278) and Executive Order 13692 of March 8, 2015 (“Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela”).
On 13 November 2017, the EU imposed an arms embargo against Venezuela. It also also established the legal framework for sanctions, including travel bans and the freezing of assets, against government officials
BRIBERY & CORRUPTION
Rating (100-Good / 0-Bad)
Transparency International Corruption Index 15
World Governance Indicator – Control of Corruption 4
Corruption represents a major obstacle for businesses operating or planning to invest in Venezuela. Most sectors of the Venezuelan economy suffer from endemic corruption, due to the highly politicized and ineffective judiciary that is inefficient in cracking down on corruption and impunity. The Venezuelan legal framework criminalizes several corruption offenses, including extortion, passive and active bribery and abuse of office. However, the legal framework does not include the bribery of foreign officials. Enforcement of anti-corruption legislation in the country is very weak, and government officials do engage in corrupt practices with impunity. Bribery and facilitation payments are widespread. Gifts given in return for an undue advantage are illegal under Venezuelan law; however, the practice is recurrent in most sectors. For further information - GAN Integrity Business Anti-Corruption Portal
Venezuela remains highly dependent on oil revenues, which account for almost all export earnings and nearly half of the government’s revenue. The country ended 2015 with an estimated 10% contraction in its GDP, 275% inflation, widespread shortages of consumer goods, and declining central bank international reserves. The IMF forecasts that the GDP will shrink another 8% in 2016 and inflation may reach 720%.
Falling oil prices since 2014 have aggravated Venezuela’s economic crisis. Insufficient access to dollars, price controls, and rigid labour regulations have led some US and multinational firms to reduce or shut down their Venezuelan operations. Market uncertainty and state oil company PDVSA’s poor cash flow have slowed investment in the petroleum sector, resulting in a decline in oil production.
Under President Nicolas MADURO, the Venezuelan Government’s response to the economic crisis has been to increase state control over the economy and blame the private sector for the shortages. The Venezuelan government has maintained strict currency controls since 2003. On 17 February 2016, the Venezuelan government announced a change from three official currency exchange mechanisms to only two official rates for the sale of dollars to private sector firms and individuals, with rates based on the government's import priorities. The official exchange rate used for food and medicine imports was devalued to 10 bolivars per dollar from 6.3 bolivars per dollar. The second rate moved to a managed float. These currency controls present significant obstacles to trade with Venezuela because importers cannot obtain sufficient dollars to purchase goods needed to maintain their operations. MADURO has used decree powers to enact legislation to deepen the state’s role as the primary buyer and distributor of imports, further tighten currency controls, cap business profits, and extend price controls.
Agriculture - products:
corn, sorghum, sugarcane, rice, bananas, vegetables, coffee; beef, pork, milk, eggs; fish
agricultural products, livestock, raw materials, machinery and equipment, transport equipment, construction materials, medical equipment, pharmaceuticals, chemicals, iron and steel products, crude oil and petroleum products
Exports - commodities:
petroleum and petroleum products, bauxite and aluminium, minerals, chemicals, agricultural products
Exports - partners:
US 26.6%, India 13.7%, China 11.7%, Cuba 6.4% (2015)
Imports - commodities:
agricultural products, livestock, raw materials, machinery and equipment, transport equipment, construction materials, medical equipment, petroleum products, pharmaceuticals, chemicals, iron and steel products
Imports - partners:
US 18.4%, China 15.3%, Brazil 9.7%, Colombia 5.9%, Mexico 4.2% (2015)
Investment Climate - US State Department
Venezuela is located on the northern coast of South America. Political tensions, state interventions in the economy, macroeconomic distortions, physical insecurity, corruption, interruptions in the supply of electricity, a challenging labor environment, and a volatile regulatory framework make Venezuela a difficult climate for foreign investors. Conditions for foreign investment are unlikely to improve in the near term. Low global oil prices have aggravated Venezuela’s economic crisis. According to Central Bank of Venezuela (BCV), the country finished 2015 with an estimated 5.7 percent economic contraction, 180.9 percent inflation, and widespread shortages of consumer goods. For 2016, the International Monetary Fund (IMF) projects that the economy will shrink another 8 percent, with inflation reaching 720 percent. Financial analysts have raised concerns that strains on Venezuela’s USD resources could exacerbate shortages of consumer goods and potentially force a default on its external debt.
The energy sector dominates Venezuela’s import-dependent economy; the petroleum industry provides roughly 94 percent of export earnings, 40 percent of government revenues, and 11 percent of Gross Domestic Product (GDP). Falling petroleum export revenues and a corruption-plagued, mismanaged foreign exchange regime have deprived multinational firms of hard currency to repatriate earnings and import inputs and finished goods. Insufficient access to hard currency, price controls, and rigid labor regulations have compelled U.S. and multinational firms to reduce or shut down their Venezuelan operations, while high costs for oil production and state oil company Petroleos de Venezuela's (PDVSA) poor cash flow have slowed investment in the petroleum sector. Venezuela has traditionally been a destination for U.S. direct investment, especially in energy and manufacturing, and for exports of U.S. machinery, medical supplies, chemicals, agricultural products, and vehicles. Such investment and trade links have been weakened in recent years by the Venezuelan government’s (GBRV’s) efforts to build commercial relationships with ideological allies, strained U.S.-Venezuelan relations, and the deteriorating investment climate.
Under President Nicolas Maduro, the GBRV’s policy response to Venezuela’s economic crisis has centered on increasing state control over the economy. President Maduro has used decree powers to pass laws that erode foreign investors’ rights; deepen the state’s role as the primary buyer and marketer of imports; tighten the currency control regime; and empower the GBRV to cap business profits and regulate prices throughout the economy. In early 2016, the GBRV has promulgated regulations to open a new alternative foreign exchange mechanism for the private sector to buy and sell dollars, but the new system suffers from a lack of transparency and has attracted limited hard currency in its first months of operation. The GBRV has implemented new laws and regulations to varying degrees, and their staying power remains unproven, increasing uncertainty in the investment climate.
U.S. and multinational firms contemplating business in Venezuela should weigh carefully the risks posed by an ongoing economic crisis, a non-transparent and heavily if unevenly regulated operating environment, and a foreign exchange regime that strictly limits access to hard currency.
Other Useful Links