The US Treasury Department’s Office of Foreign Assets Control (“OFAC”) continues to escalate the use of sanctions against the Maduro regime as well as entities that support the Maduro regime through the designation of high-profile parties as Specially Designated Nationals (“SDNs”). These designations increase the compliance risks for both US and non-US parties attempting to do business with Venezuela. Companies should watch out for additional designations under the Venezuelan sanctions, including possible designations of companies in the financial sector, gold sector, or other key sectors of the Venezuelan economy.

As a result of these 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% 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.

Designation of a Russian Bank for Attempting to Circumvent US Sanctions on Venezuela

On March 11, 2019, OFAC designated Evrofinance Mosnarbank (“Evrofinance”), a Moscow-based bank jointly owned by Russian and Venezuelan state-owned companies, as an SDN. OFAC designated Evrofinance under Executive Order (“EO”) 13850 of November 1, 2018, as amended by EO 13857 of January 25, 2019, based on a determination that Evrofinance was a foreign financial institution that had “materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, Petroleos de Venezuela S.A.” In its press release, the US Treasury Department described Evrofinance’s role in financing the Venezuelan government’s cryptocurrency, the Petro, which is the target of US sanctions under EO 13827 of March 19, 2018. The US government views the Petro as a tool of the Maduro regime to circumvent US financial sanctions. The US Treasury Department advised that this designation was to demonstrate that the US government will take action against foreign financial institutions that sustain the Maduro regime.

Designation of Parties for Operating in Venezuelan Gold Sector

On March 19, 2019, OFAC designated CVG Compania General de Minera de Venezuela CA (“Minerven”), Venezuela’s state gold mining company, and its President Adrian Antonio Perdomo Mata as SDNs under EO 13850, as amended by EO 13857, for operating in the Venezuelan gold sector. EO 13850 provides OFAC with the authority to designate parties determined “to operate in the gold sector of the Venezuelan economy or in any other sector of the Venezuelan economy as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State.” In its press release, the US Treasury Department stated that these designations targeted “the illicit gold operations that have continued to prop up the illegitimate regime of former President Nicolas Maduro.”

Designation of Venezuelan Financial Institutions

Most recently, on March 22, 2019, OFAC designated state-owned and controlled bank Banco de Desarrollo Economico y Social de Venezuela (“BANDES”), as well as four additional financial institutions that BANDES owns or controls, as SDNs under EO 13850, as amended by EO 13857, for operating in the Venezuelan financial sector of the Venezuelan economy. This followed a determination that persons operating in Venezuela’s financial sector may be subject to sanctions pursuant to EO 13850, as amended by EO 13857. The US Treasury Department’s press release stated that these designations were made in response to the illegal arrest of an aide to Juan Guaido, who the US government recognizes as the President of Venezuela.

The four financial institutions designated for being owned or controlled by BANDES are:

  • Banco Bandes Uruguay S.A. (“Bandes Uruguay”),
  • Banco Bicentenario del Pueblo, de la Clase Obrera, Mujer ye Comunias, Banco Universal C.A. (“Banco Bicentenario del Pueblo”),
  • Banco de Venezuela SA Banco Universal (“Banco de Venezuela”), and
  • Banco Prodem S.A. (“Banco Prodem”)

OFAC issued a new FAQ 663 confirming that only the entities on the Specially Designated Nationals and Blocked Persons List and any entity 50% or more owned by SDNs are blocked. That said, in light of the determination that persons operating in Venezuela’s financial sector may be subject to sanctions pursuant to EO 13850, as amended by EO 13857, additional Venezuelan financial institutions could be designated in the future.

Concurrently with these designations, OFAC re-issued one general license (“GL”) and issued four new GLs authorizing certain transactions related to certain of the four Venezuelan financial institutions designated for being owned or controlled by BANDES. The authorizations in these general licenses only extend to the SDNs named therein, and none of these authorizations extend to transactions involving BANDES itself. These descriptions are not exhaustive; each GL should be reviewed in detail before relying on the authorizations contained therein.

  • GL 4 was re-issued as GL 4A. GL 4A 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 4A now authorizes such transactions where Banco de Venezuela or Banco Bicentenario del Pueblo are involved (but not BANDES, Bandes Uruguay, or Banco Prodem). 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.)
  • GL 15 authorizes transactions between the following entities and their subsidiaries and Banco de Venezuela and Banco Bicentenario del Pueblo: (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 authorizes all transactions and activities ordinarily incident and necessary (i) to maintaining or closing accounts of US Persons with Banco de Venezuela and Banco Bicentenario del Pueblo; and (ii) to processing personal remittances with Banco de Venezuela and Banco Bicentenario del Pueblo. (Valid through March 21, 2020).
  • GL 17 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 March 22, 2019, and involve Banco de Venezuela, Banco Bicentenario del Pueblo, or Banco Prodem. (Valid through May 20, 2019).
  • GL 18 authorizes all transactions and activities ordinarily incident and necessary to maintain or operate Integración Administradora de Fondos de Ahorro Provisional, S.A. (“Integración”), whose fund administrator is owned 50% or more by Bandes Uruguay. These include purchases from or sales to Integración of securities or serving as a custodian for securities held by Integración (No expiration date.)

In addition to FAQ 663 referenced above, OFAC also issued FAQ 664, which clarifies that US financial institutions may process transactions and maintain correspondent accounts where authorized to do so under GLs 4A, 15, 16, 17, and 18.