Venezuela – Know Your Customer (KYC) Rules

 

 

Venezuela is a major cocaine-transit country. The country‘s proximity to drug producing countries, weaknesses in its anti-money laundering regime, limited bilateral cooperation, and substantial corruption in law enforcement and other relevant sectors continue to make Venezuela vulnerable to money laundering. The main sources of money laundering are proceeds generated by drug trafficking organizations and illegal transactions that exploit Venezuela‘s currency controls and its various exchange rates. The current regime of price and foreign exchange controls has provided opportunities for corruption; and corruption continues to be a very serious problem in Venezuela.

Money laundering occurs through 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. Venezuela‘s multiple exchange rates allow launderers to profit from arbitrage conditions while using the black market. Trade-based money laundering, such as the black market peso exchange, through which money launderers furnish narcotics-generated dollars in the United States to commercial smugglers, travel agents, investors, and others in exchange for Colombian pesos, remains a prominent method for laundering regional narcotics proceeds. It is reported that many black market traders ship their goods through Margarita Island‘s free port.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: YES

Venezuela – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Venezuelan Law:

    • Banks
    • Leasing companies
    • Money market and risk capital funds
    • Savings and loans
    • Foreign exchange operators
    • Regulated financial groups
    • Credit card operators
    • Hotels and tourist institutions that provide foreign exchange
    • General warehouses or storage companies
    • Regulated securities entities
    • Regulated insurance entities
    • Casinos, bingo halls, and slot machine operators
    • Regulated notaries and public registration offices

Venezuela – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 582 through June 30, 2011

The following is a list of STR covered entities covered by Venezuelan Law:

    • Banks
    • Leasing companies
    • Money market and risk capital funds
    • Savings and loans
    • Foreign exchange operators
    • Regulated financial groups
    • Credit card operators
    • Hotels and tourist institutions that provide foreign exchange
    • General warehouses or storage companies
    • Regulated securities entities
    • Regulated insurance entities
    • Casinos, bingo halls, and slot machine operators
    • Regulated notaries and public registration offices

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 13 from July 2010 – January 2011
Convictions: Two cases, involving seven persons from July 2010 – January 2011

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

The Financial Crimes Enforcement Network (FinCEN) suspended the exchange of information with Venezuela‘s National Financial Intelligence Unit (UNIF) in January 2007 due to the unauthorized disclosure of information provided by FinCEN, and the relationship has not resumed to date. In 2009 – 2011, there was no financial intelligence information exchange between Venezuela and the United States.

In 2010, the country was identified as having strategic anti-money laundering and counter-terrorist financing deficiencies and developed an action plan to address the following issues: criminalizing terrorist financing; establishing and implementing adequate procedures to identify and freeze terrorist assets; ensuring a fully operational and effectively functioning financial intelligence unit; implementing adequate customer due diligence guidelines for all sectors; and establishing adequate STR reporting obligations for money laundering and terrorist financing. The country has approved new regulations and improved the supervision of banks and securities intermediaries/brokers.

The judicial system has been ineffective and is politicized. During the year, legislation to strengthen supervision of insurance, securities, notaries and operators of casinos, bingo halls and slot machines was passed. Venezuela must increase its institutional infrastructure and technical capacity so it can effectively implement these new regulations. The government should adopt the amendments to incorporate anti-money laundering reforms into the organic law as recommended by international experts.