Can you do business in Venezuela?
Following the July 30, 2017, Venezuelan election, President Trump announced that the United States would impose financial sanctions on Venezuelan President Nicolás Maduro. The move by the US Treasury Department’s Office of Foreign Assets Control (OFAC) means that President Maduro became one of a handful of heads of state sanctioned by the US government, thereby creating significant uncertainty for companies that do business in Venezuela.
The actions have left banks and other financial institutions wondering whether it’s safe to do business with Venezuelan companies or entities controlled by Venezuelan individuals. What’s more, many may be wondering what really constitutes doing business with Venezuela in the first place.
The definitions aren’t always clear-cut. Banks would face major challenges in complying with newly imposed individual sanctions—especially when it comes to identifying which assets and accounts are owned and controlled by President Maduro and subject to US jurisdiction. Past enforcement actions suggest that that’s murky territory. For instance, such politically exposed persons (PEPs) often do business with intermediaries or shell companies, and as a result, banks don’t always know when they’re doing business with a Venezuelan-controlled entity.
In light of the recent developments, it’s important that financial institutions take the following steps.
- Review current know-your-customer controls and related systems to make sure beneficial owners and control persons are both identified and being monitored adequately to comply with sanctions.
- Conduct a focused account review of all accounts with ties to Venezuela to make sure none of the currently sanctioned PEPs have beneficial ownership or control of those particular accounts.
- Monitor counterparty risk when conducting business with both (1) companies the Venezuelan government owns and (2) privately owned companies.
- Establish sufficient due diligence to rule out control or ownership by President Maduro or other currently sanctioned Venezuelan PEPs.
So, what now?
For now, banks and other institutions must wait. Broader sanctions—which could have even-more-significant implications, like banning US imports of crude from Venezuela or restrictions on US oil exports and other products to Venezuela—remain possibilities. Because of those uncertainties as well as prevailing currency restrictions and geopolitical risk, US companies should evaluate their risk exposure in Venezuela and take steps to see that reviews and controls are in place for compliance with OFAC rules and regulations.