Countries/Jurisdictions of Primary Concern - Venezuela
Venezuela is a major cocaine transit country. The country’s proximity to drug producing countries, an ineffective AML regime, limited bilateral cooperation, and endemic corruption throughout commerce and government, including law enforcement, continue to make Venezuela vulnerable to money laundering and other financial crimes. The main sources of laundered funds are proceeds generated by drug trafficking organizations and corruption in Venezuela’s currency control regime.
Money laundering occurs through the Venezuelan government currency control regime, commercial banks, exchange houses, gambling sites, fraudulently invoiced foreign trade transactions, smuggling, real estate, agriculture and livestock businesses, securities transactions, and trade in precious metals. Trade-based money laundering remains a prominent and profitable method for laundering regional narcotics proceeds. One such trade-based scheme is the black market peso exchange, through which money launderers provide narcotics-generated dollars in the United States to commercial smugglers, travel agents, investors, and others in Colombia in exchange for Colombian pesos, which in turn are exchanged for Venezuelan bolivars at the parallel exchange rate and then used to repurchase dollars through the Venezuelan currency control regime at a stronger official exchange rate. It is reported some black market traders ship their goods through Margarita Island’s free port, one of three free trade zones/ports in Venezuela. The use of free trade zones for trade-based money laundering has become less attractive in recent years because the margins gained by laundering money through the currency control regime have reduced the incentive to use a free trade zone to avoid import duties.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: //2009-2017.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: YES
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, leasing companies, money market and risk capital funds, savings and loans, foreign exchange operators, financial groups, and credit card operators; hotels and tourist institutions that provide foreign exchange; general warehouses or storage companies; securities and insurance entities; casinos, bingo halls, and slot machine operators; and notaries and public registration offices
Number of STRs received and time frame: 3,086 in 2013
Number of CTRs received and time frame: Not available
STR covered entities: Banks, leasing companies, money market funds, savings and loans, foreign exchange operators, financial groups, and credit card operators; hotels and tourist institutions that provide foreign exchange; general warehouses or storage companies; securities and insurance entities; casinos, bingo halls, and slot machine operators; and notaries and public registration offices
money laundering criminal Prosecutions/convictions:
Prosecutions: 170: January 1 - December 31, 2013
Convictions: 3: January 1 - December 31, 2013
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
Venezuela is a member of the Caribbean Financial Action Task Force (CFATF), a Financial Action Task Force (FATF)-style regional body. Its most recent mutual evaluation can be found at: https://www.cfatf-gafic.org/index.php/member-countries/s-v/venezuela
Enforcement and implementation issues and comments:
Since 2003, the Government of Venezuela has maintained a strict regime of currency controls, in which private sector firms and individuals must request authorization from a government-operated currency commission to purchase hard currency to pay for imports and for other approved uses (e.g., foreign travel). Government ministries that spend hard currency on public procurements also must request dollars from an intra-governmental committee coordinated by the central bank. Private sector banks and financial institutions cannot hold their own deposits of hard currency, so virtually all dollars laundered through Venezuela’s formal financial system pass through the government’s currency commission, the central bank, or another government agency.
Venezuelan government officials - including the president, the executive vice president, a central bank president, a finance minister, and an interior minister - have all admitted publicly over the past 12-18 months that 30-40 percent of the roughly $53 billion the Venezuelan government spent on imports in 2013 were paid out for over-invoiced or completely fictitious transactions, i.e., schemes to defraud the currency commission and other authorities of dollars. Venezuelan government officials have also admitted publicly that corrupt public-sector employees facilitate these transactions in exchange for kickbacks.
Banking sector and law enforcement officials believe Margarita Island’s (and other free trade zones’) role in trade-based money laundering has diminished in recent years. There is almost a 3,000 percent spread between Venezuela’s official exchange rate of 6.3 bolivars/dollar and the parallel exchange rate of 180 bolivars/dollar. This margin was less than 100 percent as recently as February 2012. The massively increased bolivar profit margins achievable by defrauding the currency commission have reduced the incentive to traffic goods through duty exempt zones to avoid paying import taxes in bolivars.
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) continues to suspend the exchange of information with Venezuela’s National Financial Intelligence Unit, after the unauthorized disclosure of information provided to Venezuela in January 2007.
Venezuela has implemented its 2010 action plan and improved AML/CFT deficiencies. In January 2012, the national assembly passed the 2012 Organic Law Against Organized Crime and the Financing of Terrorism. The law defines and sanctions both organized crime and terrorist financing; however, the politicized judicial system compromises the law’s effectiveness.
The National Office against Organized Crime and Terrorist Finance has limited operational capacity. The Superintendent of Banking Sector Institutions supervises Venezuela’s financial intelligence unit – the UNIF. The UNIF should operate autonomously, independent of undue influence. The Government of Venezuela should increase institutional infrastructure and technical capacity to effectively implement its AML/CFT legislation and legal mechanisms.