FATF Status

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 relating to the implementation of anti-money laundering and counter-terrorist financing standards in Venezuela was undertaken in 2023. According to that Evaluation, Venezuela was deemed Compliant for 0 and Largely Compliant for 9 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 0 of the Effectiveness & Technical Compliance ratings.

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.

Overview   

Venezuela is characterized by rampant illicit financial activity and endemic public corruption, which continued in 2021.  Nicolás Maduro and his enablers rely on illicit activities – money laundering, drug trafficking, illegal mining, fraud, sanctions evasion, and public corruption – to help fund their activities.  

Venezuela’s proximity to drug-producing countries and its status as a significant drug transit country, combined with virtually nonexistent anti-money laundering (AML) supervision, enforcement, and international cooperation create a jurisdiction riddled with pervasive money laundering and financial crimes.  The economy remains deeply unstable and suffers from periods of severe inflation.  Liberalizing the use of U.S. dollars in the Venezuelan economy, which for years had been prohibited, has been a means to combat currency depreciation.  The effective dollarization of large swaths of the economy raises concerns about the source of those dollars and who has access to them, including at up to 30 casinos that Maduro authorized to reopen in 2021. 

Ongoing U.S. federal criminal court cases point to billions of dollars laundered and embezzled by regime officials, with several cases advancing in 2021.  A Colombian businessman was extradited to the United States to face charges arising from his role in a corrupt scheme to steal hundreds of millions of dollars through a Venezuelan government contract to build low-income housing units.  As a result of the scheme, the Colombian and his co-defendant allegedly transferred approximately $350 million out of Venezuela, through the United States, to overseas accounts they owned or controlled.  

On October 21, 2021, the U.S. Justice Department charged three Colombian nationals and two Venezuelan nationals, including the former governor of the Venezuelan state of Táchira, who is accused of receiving kickbacks from the scheme, for their alleged roles in laundering the proceeds of contracts to provide food and medicine to Venezuela that were obtained through bribes.  The indictment also leaves two officials of the Economic and Social Development Bank of Venezuela (BANDES) who took part in this corruption scheme unnamed.  BANDES, a stateowned and controlled bank, was designated by the U.S. Department of the Treasury under Executive Order 13850 in 2019.  As a result of the scheme, the defendants and their coconspirators allegedly received approximately $1.6 billion from Venezuela and transferred approximately $180 million through or to the United States.

There have been no improvements since the U.S. Financial Crimes Enforcement Network’s

(FinCEN) 2019 Updated Advisory on Widespread Public Corruption in Venezuela, which states Maduro and his allies, through state-owned enterprises and offshore third parties, engaged in massive corruption that contributed to the dire humanitarian situation in Venezuela.  FinCEN continues to assess that all Maduro-controlled bodies appear vulnerable to public corruption, money laundering, and other financial crimes; and Maduro uses control of the economy to generate significant wealth for senior political figures and associates.  U.S. Presidential Executive Order 13884, Blocking Property of the Government of Venezuela, addresses the continued usurpation of power by Maduro and persons affiliated with him as well as human rights abuses and the undermining of the interim government and the legitimately elected Venezuelan national assembly.  

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           13

World Governance Indicator – Control of Corruption              2

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

Industries:
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.

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Country Links

National Financial Intelligence Unit (UNIF )

Central Bank of Venezuela