The Financial Crimes Enforcement Network (FinCEN) issued an advisory, warning banks about widespread public corruption in Venezuela and what methods Venezuelan senior political figures may use to move and hide corruption proceeds.
In its advisory, issued Sept. 20, FinCEN warned that transactions involving Venezuelan government agencies and SOEs, particularly those involving government contracts, can potentially be used as vehicles to move, launder, and conceal embezzled corruption proceeds. SOEs, and their officials, may try to use the U.S. financial system to move or hide proceeds of public corruption.
Among the SOEs referenced in OFAC’s recent designations related to Venezuela are:
The National Center for Foreign Commerce (CENCOEX);
Suministros Venezolanos Industriales, CA (SUVINCA);
The Foreign Trade Bank (BANCOEX);
The National Telephone Company (CANTV);
The National Electric Corporation (CORPELEC);
Venezuelan Economic and Social Bank (BANDES), and similar state-controlled entities.
“As law enforcement and financial institutions increase scrutiny of transactions involving Venezuelan SOEs, corrupt officials may try to channel illicit proceeds through lesser-known or newly-created SOEs or affiliated enterprises,” FinCEN warned.
FinCEn citted the following financial red flags to watch for:
Transactions involving Venezuelan government contracts that are directed to personal accounts;
Transactions involving Venezuelan government contracts that are directed to companies that operate in an unrelated line of business (e.g., payments for construction projects directed to textile merchants);
Transactions involving Venezuelan government contracts that originate with, or are directed to, entities that are shell corporations, general “trading companies,” or companies that lack a general business purpose;
Invoices involving Venezuelan government contracts that include charges at substantially higher prices than market rates or that include overly simple documentation or lack traditional details (e.g., valuations for goods and services).
Payments involving Venezuelan government contracts that originate from non-official Venezuelan accounts, particularly accounts located in jurisdictions outside Venezuela (e.g., Panama or the Caribbean);
Payments involving Venezuelan government contracts that originate from third parties that are not official Venezuelan government entities (e.g., shell companies); and
Cash deposits instead of wire transfers in the accounts of companies with Venezuelan government contracts.
Other financial red flags observed in transactions suspected of involving Venezuelan government corruption include transactions for the purchase of real estate—primarily in the South Florida and Houston, Texas regions—involving current or former Venezuelan government officials, family members or associates that is not commensurate with their official salaries.
In its advisory, FinCEN reiterated the importance of a risk-based approach: “Financial institutions should be aware that normal business and other transactions involving Venezuelan nationals and businesses do not necessarily represent the same risk as transactions and relationships identified as being connected to the Venezuelan government, Venezuelan officials, and Venezuelan state-owned enterprises (SOEs) involved in public corruption that exhibit the red flags below or other similar indicia.”