On a bizarre day for sanctions that saw President Trump seemingly take action related to North Korea via tweet – revoke recent measures? scuttle pending ones? – the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added Venezuela’s national development bank, Banco de Desarrollo Economico y Social de Venezuela (“Bandes”), to OFAC’s List of Specially Designated Nationals and Blocked Persons (the “SDN List”). OFAC “designated” Bandes pursuant to Executive Order (E.O.) 13850 (“Blocking Property of Additional Persons Contributing to the Situation in Venezuela”), the new favorite authority for headline-grabbing Venezuela sanctions.
The move comes just days after OFAC added Venezuelan state gold-mining company CVG Compania General de Mineria de Venezuela CA (“Minerven”) to the SDN List, and roughly two months after it did the same to national oil company Petróleos de Venezuela, S.A. (PDVSA). The Venezuelan gold, energy, and now financial sectors are therefore all economic areas in which parties face potential sanctions for operating. OFAC also recently demonstrated its willingness to sanction parties that provide material support to designated Venezuelan entities when it added Evrofinance Mosnarbank, a Moscow-based financial institution with Venezuelan and Russian stakeholders, to the SDN List for actions involving PDVSA.
In addition to Bandes itself, OFAC also designated four banks that Bandes owns or controls: Banco Bandes Uruguay S.A. (“Bandes Uruguay”); Banco Bicentenario del Pueblo, de la Clase Obrera, Mujer y Comunias, Banco Universal C.A. (“Banco Bicentenario”); Banco de Venezuela, S.A. Banco Universal (“Banco de Venezuela”); and Banco Prodem S.A. (“Banco Prodem”). In keeping with OFAC’s 50 Percent Rule, the sanctions against Bandes and the other banks extend to any entity in which one or more of them owns an interest of 50% or more.
Of course, this wouldn’t be a Venezuela-related sanctions action without some new general licenses to pore over. This time OFAC gave us four, and they are mercifully vanilla.
The first, General License 15, authorizes all transactions that are prohibited under E.O. 13850 but ordinarily incident and necessary to Mastercard Incorporated, Visa Inc., American Express Company, Western Union Company, MoneyGram International, and their subsidiaries engaging in activities involving Banco Bicentenario and Banco de Venezuela. The general license does not authorize dealings with Bandes or Bandes Uruguay, the unblocking of blocked property, or any other transaction prohibited by an applicable sanctions authority. General License 15 expires on March 22, 2020.
General License 16 also expires on March 22, 2020, and authorizes all transactions that are prohibited under E.O. 13850 but ordinarily incident and necessary to (1) maintaining, operating, or closing accounts of U.S. persons in Banco de Venezuela or Banco Bicentenario, and (2) processing noncommercial personal remittances. General License 16 explicitly states that authorized remittances do not include charitable donations to or for the benefit of any entity, nor do they include funds transfers to support or operate businesses. The license further states that a U.S. financial institution may rely on a remittance’s originator for compliance purposes unless the financial institution knows or has reason to know that a transfer doesn’t comply with the authorization’s terms. Like General License 15, General License 16 does not authorize dealings with Bandes or Bandes Uruguay, the unblocking of blocked property, or any other transaction prohibited by an applicable sanctions authority.
General License 17 is a traditional “wind-down” license, authorizing all transactions that are prohibited under E.O. 13850 but ordinarily incident and necessary to winding down operations, contracts, or other agreements involving Banco de Venezuela, Banco Bicentenario, or Banco Prodem that were in effect prior to March 22, 2019. Continuing the trend, General License 17 does not authorize dealings with Bandes or Bandes Uruguay (despite Prodem’s inclusion in this authorization), the unblocking of blocked property, or any other transaction prohibited by an applicable sanctions authority. The license expires on May 21, 2019.
Last but not least is General License 18, which might be the most interesting of the new authorizations because it deals with prohibitions under both E.O. 13850 and E.O. 13808, the legal authority that first introduced real complexity into the Venezuela sanctions program. General License 18 authorizes all transactions that are prohibited under E.O. 13850 and section 1(b) of E.O. 13808 but ordinarily incident and necessary to maintaining or operating Integración Administradora de Fondos de Ahorro Previsional, S.A. (“Integración”), a pension fund administrator in which (according to OFAC) Bandes Uruguay has a stake of 50% or greater. Section 1(b) of E.O. 13808 prohibits U.S. persons from directly or indirectly purchasing most securities from the Government of Venezuela. General License 18 speaks directly to this prohibition by authorizing U.S. persons to purchase securities from Integración, sell securities to Integración, and serve as a custodian for securities held by Integración. As with the other general licenses, General License 18 does not authorize anyone to unblock blocked property or engage in any other transaction prohibited by an applicable sanctions authority. Notably, however, the license does authorize dealings with Bandes and Bandes Uruguay that are ordinarily incident and necessary to maintaining or operating Integración. General License 18 has no expiration date.
In addition to the four new general licenses, OFAC issued an amended General License 4A to authorize transactions with Banco de Venezuela and Banco Bicentenario that are ordinarily incident and necessary to exporting or re-exporting agricultural commodities, medicine, medical devices, and replacement parts and components for medical devices to Venezuela. As in General Licenses 15, 16, and 17, dealings with Bandes and Bandes Uruguay remain prohibited.
Per new FAQ 664, U.S. financial institutions and registered money transmitters can process transactions and debit and credit Banco de Venezuela, Banco Bicentenario, Banco Prodem, and Integración correspondent accounts in accord with the general licenses applicable to them.
With six executive orders, 18 protean general licenses, and dozens of FAQs, the Venezuela sanctions program has arguably nudged past Iran and Russia for the dubious distinction of being the most complicated program OFAC administers. (It has certainly outpaced all the others in public actions so far this year.) Two questions that OFAC must be struggling with are: (1) What is the return on all this complexity? and (2) Would a Syria-style comprehensive program have any significant adverse consequences that aren’t already playing out under the current sanctions framework? Sanctions fatigue around the program is sky high, and with Venezuelan oil and debt now being squeezed out of the U.S. economy, and increasingly risky elsewhere, it is hard to identify more meaningful directions in which the program might expand while still maintaining broad support in the region and beyond. Whack-A-Mole actions like this one aimed at crimping regime revenues and evasion opportunities are likely to continue, as are occasional corruption network designations that make Maduro regime insiders feel the pain personally.