The newly imposed sanctions on the Government of Venezuela are aimed at limiting the Maduro regime’s access to all property and interests that are in, or come within, the United States. These sanctions are quickly becoming comparable to those imposed on Iran, Cuba, and North Korea in that they aim to alienate the Maduro regime’s access to finances that could potentially be used to extend its rule in Venezuela. However, the additional sanctions on the Government of Venezuela fall short of becoming an official embargo of the country. That being said, the sanctions may also be imposed on foreign companies or countries that choose to do business with Maduro’s government. An important distinction is that dealings with U.S.-recognized legitimate Interim President Guaido are not prohibited.
Earlier this year, the U.S. had already imposed sanctions on Venezuela’s oil and gold industries inclusive of a list of specific companies and people with ties to the Maduro government. As part of those sanctions, the Office of Foreign Assets Control issued several general licenses to allow a wind down period for certain companies doing business with the sanctioned entities. Added to that list are thirteen new licenses for the allowance of humanitarian aid and twelve amended licenses. The wind down license for companies to cease doing business with the Petroleos de Venezuela, S.A. has now ended and will not be extended. Those who currently conduct business with the Government of Venezuela may be eligible to use General License 28 to wind down activity prior to the 30-day cutoff of September 4, 2019.
The “Government of Venezuela” includes:
- the state and Government of Venezuela, any political subdivision, agency, or instrumentality thereof, including the Central Bank of Venezuela and Petroleos de Venezuela, S.A. (PdVSA)
- any person owned or controlled, directly or indirectly, by the foregoing, and any person who has acted or purported to act directly or indirectly for or on behalf of, any of the foregoing, including as a member of the Maduro regime.
Because of the new sanctions, it is of the utmost importance that parties continuing to do business with Venezuelan entities screen transactions and conduct updated due diligence to ensure that entities have not been added to the Specially Designated Nationals lists, and that the Venezuelan government does not own, directly or indirectly, interest in these entities. It remains unclear whether the President’s Aug. 5 Executive Order affects every company with Venezuelan governmental interest, or just those with 50 percent or greater interest.
For more guidance on the Venezuela sanctions, visit the OFAC FAQ page here.
When conducting business with a company you have concerns about, request a list of ownership in the company. You should begin with screening this list. It would also be beneficial to screen the corporate officers, directors, and contract signatories. In addition, financial institutions should screen their customers. There likely will be some pushback, but as reasoning for why the list is necessary, it is difficult to deny this request based on potential penalties which can be quite painful. The current statutory maximum civil monetary penalty per violation of the International Emergency Economic Powers Act, under which the Venezuela sanctions fall, is the greater of $302,584, or twice the amount of the underlying transaction. For new contracts or transactions, requesting ownership structure lists, and corporate officer lists, should be built into your compliance program as a necessary step in due diligence.
Braumiller Law Group has the resources and experience to assist you in your screening needs. We can also assist in requesting the necessary lists to screen. For more information on 2019 OFAC Recent Actions involving Venezuela-related designations, visit here.