U.S. Office of Foreign Assets Control Sanctions Venezuelan Development Bank BANDES and Subsidiaries

On March 22, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Venezuela’s national development bank, Banco De Desarrollo Económico Y Social de Venezuela (BANDES), and four BANDES subsidiaries for operating in the financial sector of the Venezuelan economy.  In a statement, U.S. Secretary of the Treasury Steven T. Mnuchin specifically tied these new sanctions to the arrest of opposition leader Juan Guaidó’s chief of staff Roberto Marrero “and other political prisoners” by the regime of Venezuelan President Nicolás Maduro.

Secretary Mnuchin also declared that

[r]egime insiders have transformed BANDES and its subsidiaries into vehicles to move funds abroad in an attempt to prop up Maduro.  Maduro and his enablers have distorted the original purpose of the bank, which was founded to help the economic and social well-being of the Venezuelan people, as part of a desperate attempt to hold onto power,

Notwithstanding BANDES’s stated purpose as a development bank, the Maduro regime has used BANDES to circumvent existing sanctions.  According to the Treasury Department, in early 2019 Maduro tried to move more than $1 billion out of Venezuela via BANDES to its subsidiary in Uruguay, Banco Bandes Uruguay S.A. (now one of the four sanctioned BANDES subsidiaries).  The other three BANDES subsidiaries that have been sanctioned include Banco Bicentenario del Pueblo, de la Clase Obrera, Mujer y Comunias, Banco Universal C.A., Banco de Venezuela, S.A. Banco Universal, and Banco Prodem S.A.  In addition, the Chief Executive and President of the Board of BANDES, Simon Alejandro Zerpa Delgado, has been subject to OFAC sanctions since 2017.

Note: Financial institutions’ sanctions compliance teams should take note of this latest round of OFAC Venezuelan sanctions, both for its immediate and prospective effects on international financial transactions (including facilitating credit-card transactions, beginning in March 2020) and for its political ramifications.  Although they are far less damaging to the Venezuelan economy than the sanctions already in place against PDVSA, President Donald Trump’s National Security Adviser, John Bolton, stated that BANDES “is to Venezuela’s financial sector what PDVSA is to its oil sector.”

The new sanctions may also create additional collateral pressures on the Maduro regime.  For more than a decade, BANDES reportedly has received billions of dollars from the China Development Bank in exchange for oil.  One opposition legislator has suggested that the sanctions would impede efforts by the regime to restructure its $20 billion debt with China.

Finally, the BANDES sanctions also close another bolt hole for Maduro to transfer state funds out of the country and send a strong signal to the Maduro regime about efforts to repress the burgeoning opposition.  If, as the New York Times suggested, the Marrero arrest was an effort by Maduro to call the Trump Administration’s bluff, the BANDES sanctions are probably sufficient to indicate that the Administration still has hole cards to play.

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