On April 17, 2019, the US Treasury Department’s Office of Foreign Assets Control (“OFAC”) continued its escalation of sanctions against Venezuela and Nicaragua through the designation of additional parties as Specially Designated Nationals (“SDNs”). OFAC issued two Venezuelan general licenses (“GLs”), amended certain Venezuelan GLs, and issued one FAQ, as further described below. A summary of OFAC’s measures is available here, and a related press release issued by the White House is available here.

As a result of SDN designations, all of the property and interests in property within US jurisdiction of the designated individuals and entities are blocked. “US Persons” are generally prohibited from engaging in transactions with SDNs and any entities 50 percent or more owned by SDNs. “US Persons” include (i) entities organized under US laws and their non-US branches, (ii) individuals or entities in the United States, or (iii) US citizens or permanent resident aliens (“Green Card” holders) wherever located or employed. Non-US Persons may be liable under the sanctions if they “cause” SDN-related transactions to occur in whole or in part in the United States.

Developments under US Sanctions Targeting Venezuela

OFAC designated state-owned and controlled bank Banco Central de Venezuela, or the Central Bank of Venezuela, pursuant to Executive Order (“EO”) 13850 of November 1, 2018, as amended by EO 13857 of January 25, 2019, for operating in the financial sector of the Venezuelan economy. In addition, OFAC designated the Central Bank of Venezuela’s Director, Iliana Josefa Ruzza Terán under EO 13692 of March 8, 2015, as amended, for being a Venezuelan Government official. OFAC’s press release on the Venezuelan designations acknowledge that the designation will inhibit most Central Bank of Venezuela activities undertaken by the illegitimate Maduro regime, but states that the US Government has taken steps to ensure regular debit and credit card transactions, personal remittances, and humanitarian assistance can continue.

To that end, OFAC also issued two new GLs authorizing certain transactions related to the Central Bank of Venezuela, and amended five other GLs, as summarized below. These descriptions are not exhaustive; each GL should be reviewed in detail before relying on the authorizations contained therein. The two new GLS are as follows:

  • GL 19 authorizes all transactions and activities ordinarily incident and necessary to the wind-down of operations, contracts, or other agreements that were in place prior to April 17, 2019, and involve the Central Bank of Venezuela. (Valid through May 16, 2019.)
  • GL 20 authorizes all transactions and activities that are for the official business of the following entities listed below:
    • CAF Development Bank of Latin America
    • Fondo Latinoamericano de Reservas
    • Inter-American Development Bank
    • International Committee of the Red Cross
    • International Federation of the Red Cross and Red Crescent Societies
    • International Monetary Fund
    • Organization of American States
    • United Nations and its specialized agencies, programs, funds, and related organizations
    • World Bank

GL 20 automatically renews on the first day of each month, and is valid for a period of 18 months from the effective date of GL 20 (i.e., 18 months from April 17, 2019 or October 17, 2020) or the day of any subsequent renewal of GL 20, whichever is later.

OFAC amended the following five GLs:

  • GL 3D and GL 9C were re-issued as GL 3E and GL 9D to explicitly reference the application of the GLs in connection with the Central Bank of Venezuela. The amended licenses extend the expiration of the provisions therein relating to the wind-down of certain financial contracts or other agreements involving the bonds listed in the Annex to GL 3E (“GL 3E Bonds”) and trades in certain securities from May 10, 2019 to September 30, 2019. GL 3E also clarifies that GL 3E does not authorize US Persons to sell, or to facilitate in the sale of, the GL 3E Bonds to, directly or indirectly, any person whose property and interests in property are blocked pursuant to EO 13850, including the Central Bank of Venezuela, Petróleos de Venezuela S.A. (“PdVSA”), or any entities in which the Central Bank of Venezuela or PdVSA owns, directly or indirectly, a 50 percent or greater interest. (Valid through September 29, 2019). Our prior blog posts on the earlier GLs, including the scope of these GLs, are here, here, here, here, and here.
  • GL 4A was re-issued as GL 4B. GL 4B continues to authorize US Persons to engage in certain transactions related to, the provision of financing for, and other dealings in new debt prohibited under EO 13808 of August 24, 2017 related to the export or reexport from the United States or by US Persons of agricultural commodities, medicine, medical devices, or replacement parts and components for medical devices to Venezuela, or to persons in third countries purchasing specifically for resale to Venezuela. GL 4B now authorizes such transactions where the Central Bank of Venezuela is involved. These exports and reexports must be licensed or otherwise authorized under the Export Administration Regulations, 15 C.F.R. Parts 730-774. (No expiration date.) Our prior blog posts on the earlier GLs are here and here.
  • GL 15 was reissued as GL 15A and has been amended to add the Central Bank of Venezuela and its subsidiaries to the list of entities authorized to transact with the following companies: (i) MasterCard Incorporated, (ii) Visa Inc., (iii) American Express Company, (iv) Western Union Company, and (v) MoneyGram International. (Valid through March 21, 2020).
  • GL 16 was re-issued as GL 16A. GL 16A has been amended to authorize all transactions and activities ordinarily incident and necessary to processing personal remittances with the Central Bank of Venezuela. (Valid through March 21, 2020). However, GL 16A does not authorize maintaining, operating, or closing accounts of the Central Bank of Venezuela although GL 16A continues to authorize maintaining, operating, or closing accounts of the other banks within the scope of this GL.

Lastly, OFAC issued a new FAQ 665, which clarifies that due to the amendments to the GLs and the issuance of a new GL (GL 20), the designation of the Central Bank of Venezuela does not restrict the ability of US Persons to engage in or facilitate the provision of humanitarian assistance or non-commercial, personal remittances to Venezuela.

Developments under US Sanctions Targeting Nicaragua

OFAC also designated Laureano Ortega Murillo, the son of Nicaraguan President Daniel Ortega, as well as Nicaraguan bank Banco Corporativo SA (“BanCorp”) under EO 13851 of November 27, 2018. OFAC’s press release states that the designations were made for the parties’ continued support of the Ortega regime, which continues to engage in corruption, violence, and human rights violations. In the same press release, OFAC noted that BanCorp, as a subsidiary of Albanisa, is ultimately owned by PdVSA, and thus was already blocked due to the application of the 50 percent rule following the designation of PdVSA on January 28, 2019.