On March 9, 2015, President Obama signed the Executive Order Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela, declaring the current situation in Venezuela a threat to national security and imposing sanctions on certain Venezuelan military and security officials. While the sanctions are limited to certain individuals for now, companies, both foreign and domestic, doing business in the region should ensure that their compliance programs capture the new sanctions to prevent possible violations. U.S. companies with business involving Venezuela should ensure that their activities do not relate to parties designated under the new sanctions. Non-U.S. companies engaged in business with or involving targeted parties face their own risks as sanctions may be imposed on persons or entities that provide material support to designated parties.
The Executive Order, promulgated in the wake of President Obama's signing of the Venezuela Defense of Human Rights and Civil Society Act of 2014 on December 18, 2014, was issued in response to "the situation in Venezuela, including the Government of Venezuela's erosion of human rights guarantees, persecution of political opponents, curtailment of press freedoms, use of violence and human rights violations and abuses in response to antigovernment protests, and arbitrary arrest and detention of antigovernment protestors, as well as the exacerbating presence of significant public corruption" in Venezuela.
Pursuant to the new sanctions, the following persons may be designated on the list of Specially Designated Nationals and Blocked Persons ("SDN List") and blocked:
- Persons responsible for or complicit in, or responsible for ordering, controlling, or otherwise directing, or who have participated in: (i) actions or policies that undermine democratic processes or institutions; (ii) significant acts of violence or conduct that constitutes a serious abuse or violation of human rights (including against persons involved in antigovernment protests in Venezuela in or since February 2014); (iii) actions that prohibit, limit, or penalize the exercise of freedom of expression or peaceful assembly; or (iv) public corruption by senior officials within the Government of Venezuela.
- Current or former leaders of an entity that has, or whose members have, engaged in any activity described above, or of an entity designated under the sanctions.
- Current or former officials of the Government of Venezuela.
In conjunction with the Executive Order, the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC") added seven Venezuelan military and security officials to the SDN List. Any entity owned 50 percent or more by one or more designated persons also is considered a designated party, regardless of whether the owned or controlled entity itself is designated on the SDN List.
U.S. companies engaging in activities in Venezuela generally are prohibited from any business activities that involve or otherwise relate to these designated individuals or any entities majority-owned by them. In addition, the designated persons are prohibited from entering the United States. Finally, any parties, including non-U.S. persons, also may be designated on the SDN List and blocked if they: (i) materially assist, sponsor, or provide financial, material, or technological support for, or goods or services to or in support of, the above-described persons or activities; or (ii) are owned or controlled by, or act for or on behalf of any person designated under the sanctions.
Companies doing business with Venezuela should perform due diligence on existing or potential business partners, including customers, to confirm whether they are on the SDN List or owned or controlled by any designated parties. As additional designations are possible, companies should also evaluate whether their business involves any of the categories of potential sanctioned parties, such as current or former officials of the Government of Venezuela. This will allow companies to assess their current risk against an expansion of the sanctions or additions to the SDN List, and plan for contingencies if those occur.