OFAC Venezuela Sanction FAQ: Question 5

 

What does OFAC interpret to be debt and equity? Can U.S. financial institutions continue to maintain correspondent accounts and process U.S. dollar-clearing transactions for the entities subject to these sanctions?

The term debt includes bonds, loans, extensions of credit, loan guarantees, letters of credit, drafts, bankers acceptances, discount notes or bills, or commercial paper. The term equity includes stocks, share issuances, depositary receipts, or any other evidence of title or ownership.

The prohibitions in Subsections 1(a)(i) of E.O. of August 24, 2017 apply to all transactions involving new debt with a maturity of longer than 90 days; all financing in support of such new debt; and any dealing in, including provision of services in support of, such new debt.

The prohibitions in Subsections 1(a)(ii) of E.O. of August 24, 2017 apply to all transactions involving new debt with a maturity of longer than 30 days or new equity; all financing in support of such new debt or new equity; and any dealing in, including provision of services in support of, such new debt or new equity.

These prohibitions extend to rollover of existing debt, if such rollover results in the creation of new debt with a maturity of longer than 90 days (with respect to PdVSA) or longer than 30 days (with respect to the rest of the Government of Venezuela).

Engaging in transactions related to, providing financing for, or otherwise dealing in any equity issued by, on behalf of, or for the Government of Venezuela is permissible, if the equity was issued prior to the effective date of E.O. of August 24, 2017.

Engaging in transactions related to, providing financing for, or otherwise dealing in any debt issued by, on behalf of, or for the Government of Venezuela is permissible, if the debt was issued prior to the effective date of E.O. of August 24, 2017, and, in the case of bonds, either (1) the bonds are included on the List of Authorized Venezuela-Related Bonds referenced in General License 3, or (2) the bonds were issued by U.S. person entities owned or controlled, directly or indirectly, by the Government of Venezuela (such as CITGO Holding, Inc.). The List of Authorized Venezuela-Related Bonds is available as an appendix to General License 3, and is also available as a stand-alone document on the Venezuela-related Sanctions page of OFAC’s website. The list will also be published in the Federal Register, as will any changes to the list.

Despite the above allowances, E.O. of August 24, 2017 prohibits U.S. persons from purchasing securities of any kind – including debt and equity securities – from the Government of Venezuela. The exception to this prohibition is purchasing securities that qualify as (a) new debt of PdVSA with a maturity of less than or equal to 90 days, or (b) new debt of any other part of the Government of Venezuela with a maturity of less than or equal to 30 days. U.S. persons are authorized to deal with the Government of Venezuela as counterparty to transactions involving securities that fall into either of these two categories. U.S. persons are not authorized to purchase, directly or indirectly, bonds on the List of Authorized Venezuela-Related Bonds from the Government of Venezuela.

U.S. financial institutions may continue to maintain correspondent accounts and process U.S. dollar-clearing transactions for the Government of Venezuela, so long as those activities do not involve engaging in transactions related to, providing financing for, or otherwise dealing in transaction types prohibited by E.O. of August 24, 2017. 

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