March 19, 2018: OFAC makes Venezuela sanctions changes

On Monday, OFAC added the following individuals to the SDN List:

CONTRERAS, Willian Antonio (a.k.a. CONTRERAS, William), Capital District, Venezuela; DOB 17 Aug 1968; citizen Venezuela; Gender Male; Cedula No. 9953939 (Venezuela); Passport 041067710 (Venezuela) expires 12 Jan 2016; Vice Minister of Internal Commerce, within the Ministry of Popular Power of Economy and Finance; National Superintendent for the Defense of Socioeconomic Rights (SUNDDE) (individual) [VENEZUELA]. 
 
LEPAJE SALAZAR, Nelson Reinaldo, Aragua, Venezuela; DOB 24 Apr 1969; citizen Venezuela; Gender Male; Cedula No. 10049353 (Venezuela); Passport 064906043 (Venezuela) expires 12 Jan 2016; alt. Passport 009551291(Venezuela) expires 04 Mar 2013; Acting in the Capacity of the Head of the Office of the National Treasury (individual) [VENEZUELA]. 
 
MATA GARCIA, Americo Alex (Latin: MATA GARCÍA, Américo Alex) (a.k.a. MATA, Americo (Latin: MATA, Américo)), Miranda, Venezuela; DOB 02 Jan 1976; citizen Venezuela; Gender Male; Cedula No. 12711021 (Venezuela); Passport C1506013 (Venezuela); Alternate Director on the Board of Directors of the National Bank of Housing and Habitat; Former Vice Minister of Agricultural Economics; Former President of the Agricultural Bank of Venezuela (individual) [VENEZUELA]. 
 

ROTONDARO COVA, Carlos Alberto (a.k.a. ROTONDARO COVA, Carlos; a.k.a. ROTONDARO, Carlos), Capital District, Venezuela; DOB 11 Sep 1965; citizen Venezuela; Gender Male; Cedula No. 6157070 (Venezuela); Passport 083445280(Venezuela) expires 29 Jan 2019; alt. Passport 022740782 (Venezuela) expires 24 May 2014; Former President of the Board of Directors of the Venezuelan Institute of Social Security (IVSS) (individual) [VENEZUELA].

In addition, the President issued a new Venezuela-related Executive Order, the nub of which is this:

All transactions related to, provision of financing for, and other dealings in, by a United States person or within the United States, any digital currency, digital coin, or digital token, that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018, are prohibited as of the effective date of this order.

And OFAC issued two new FAQs – one for the new Executive Order:

564. For purposes of Executive Order (E.O.) “Taking Additional Steps to Deal with the Situation in Venezuela” of March 19 2018, are the “petro” and “petro-gold” considered a “digital currency, digital coin, or digital token” that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018? 

Answer: Yes. [03-19-2018]


565. For purposes of E.O. “Taking Additional Steps to Deal with the Situation in Venezuela” of March 19, 2018, is Venezuela’s traditional fiat currency, bolivar fuerte, considered a “digital currency, digital coin, or digital token” that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018?

Answer: No. [03-19-2018]


566. I participated in the pre-sale for a Government of Venezuela-issued “digital currency, digital coin, or digital token” before E.O. “Taking Additional Steps to Deal with the Situation in Venezuela” of March 19, 2018, became effective. Am I allowed to sell, trade, use, or otherwise deal in such “digital currency, digital coin, or digital token” on or after the sanctions effective date?

Absent authorization from OFAC, U.S. persons are prohibited from engaging in transactions related to, providing financing for, and otherwise dealing in any “digital currency, digital coin, or digital token” that was issued by, for, or on behalf of the Government of Venezuela on or after January 9, 2018. OFAC would consider license applications involving Government of Venezuela-issued “digital currency, digital coin, or digital token” on a case-by-case basis and base licensing determinations on the facts and circumstances of the particular application. [03-19-2018]

and one related to digital currencies:

559. For purposes of OFAC sanctions programs, what do the terms “virtual currency,” “digital currency,” “digital currency wallet,” and “digital currency address” mean? 

Virtual currency is a digital representation of value that functions as (i) a medium of exchange; (ii) a unit of account; and/or (iii) a store of value; is neither issued nor guaranteed by any jurisdiction; and does not have legal tender status in any jurisdiction. 

Digital currency includes sovereign cryptocurrency, virtual currency (non-fiat), and a digital representation of fiat currency. 

A digital currency wallet is a software application (or other mechanism) that provides a means for holding, storing, and transferring digital currency. A wallet holds the user’s digital currency addresses, which allow the user to receive digital currency, and private keys, which allow the user to transfer digital currency. The wallet also maintains the user’s digital currency balance. A wallet provider is a person (individual or entity) that provides the software to create and manage wallets, which users can download. A hosted wallet provider is a business that creates and stores a digital currency wallet on behalf of a customer. Most hosted wallets also offer exchange and payments services to facilitate participation in a digital currency system by users. 

A digital currency address is an alphanumeric identifier that represents a potential destination for a digital currency transfer. A digital currency address is associated with a digital currency wallet. [03-19-18]


560. Are my OFAC compliance obligations the same, regardless of whether a transaction is denominated in digital currency or traditional fiat currency?

Yes, the obligations are the same. U.S. persons (and persons otherwise subject to OFAC jurisdiction) must ensure that they block the property and interests in property of persons named on OFAC’s SDN List or any entity owned in the aggregate, directly or indirectly, 50 percent or more by one or more blocked persons, and that they do not engage in trade or other transactions with such persons. 

As a general matter, U.S. persons and persons otherwise subject to OFAC jurisdiction, including firms that facilitate or engage in online commerce or process transactions using digital currency, are responsible for ensuring that they do not engage in unauthorized transactions prohibited by OFAC sanctions, such as dealings with blocked persons or property, or engaging in prohibited trade or investment-related transactions. Prohibited transactions include transactions that evade or avoid, have the purpose of evading or avoiding, cause a violation of, or attempt to violate prohibitions imposed by OFAC under various sanctions authorities. Additionally, persons that provide financial, material, or technological support for or to a designated person may be designated by OFAC under the relevant sanctions authority.

Persons including technology companies; administrators, exchangers, and users of digital currencies; and other payment processors should develop a tailored, risk-based compliance program, which generally should include sanctions list screening and other appropriate measures. An adequate compliance solution will depend on a variety of factors, including the type of business involved. There is no single compliance program or solution suitable for every circumstance. [03-19-18]


561. How will OFAC use its existing authorities to sanction those who use digital currencies for illicit purposes?

The United States’ whole-of-government strategies to combat global threats such as terrorism, transnational organized crime, malicious cyber activity, narcotics trafficking, weapons of mass destruction (WMD) proliferation, and human rights abuses include targeting an array of activities, including the use of digital currencies or other emerging payment systems to conduct proscribed financial transactions and evade U.S. sanctions. The strategies draw from a broad range of tools and authorities to respond to the growing and evolving threat posed by malicious actors using new payment mechanisms. OFAC will use sanctions in the fight against criminal and other malicious actors abusing digital currencies and emerging payment systems as a complement to existing tools, including diplomatic outreach and law enforcement authorities. To strengthen our efforts to combat the illicit use of digital currency transactions under our existing authorities, OFAC may include as identifiers on the SDN List specific digital currency addresses associated with blocked persons. [03-19-18]


562. How will OFAC identify digital currency-related information on the SDN List?

OFAC may add digital currency addresses to the SDN List to alert the public of specific digital currency identifiers associated with a blocked person. OFAC’s digital currency address listings are not likely to be exhaustive. Parties who identify digital currency identifiers or wallets that they believe are owned by, or otherwise associated with, an SDN and hold such property should take the necessary steps to block the relevant digital currency and file a report with OFAC that includes information about the wallet’s or address’s ownership, and any other relevant details. [03-19-18]


563. What is the structure of a digital currency address on OFAC’s SDN List?

The digital currency address field on the SDN List provides the unique alphanumeric identifiers (up to 256 characters) for digital currency addresses and identifies the digital currency to which the address corresponds (e.g., Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Neo (NEO), Dash (DASH), Ripple (XRP), Iota (MIOTA), Monero (XMR), and Petro (PTR)). [03-19-18]

And, for good measure, Treasury issued the following press release:

Treasury Sanctions Four Current or Former Venezuelan Officials Associated with Economic Mismanagement and Corruption

 
MARCH 19, 2018

Washington – Today the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated four current or former Venezuelan government officials pursuant to Executive Order (E.O.) 13692, as part of Treasury’s ongoing efforts to highlight the economic mismanagement and endemic corruption that have been the defining features of the Maduro regime.  The Venezuelan government’s actions have rendered Venezuela’s currency essentially worthless through hyperinflation, made food and medicine rare commodities through price controls, and triggered a humanitarian crisis that the Venezuelan government refuses to alleviate by changing policy or accepting international assistance. 

“President Maduro decimated the Venezuelan economy and spurred a humanitarian crisis.  Instead of correcting course to avoid further catastrophe, the Maduro regime is attempting to circumvent sanctions through the Petro digital currency – a ploy that Venezuela’s democratically-elected National Assembly has denounced and Treasury has cautioned U.S. persons to avoid,” said Secretary of the Treasury Steven T. Mnuchin.  “Today, I participated in an important meeting in Argentina with my counterparts from the region and Europe, where we discussed how to achieve our shared objectives of restoring Venezuelan democracy, combating the kleptocracy of the Maduro regime, and responding to the humanitarian crisis caused by Maduro’s economic policy. We urge Maduro to distribute humanitarian aid and stop blocking much-needed foreign assistance to the suffering people of Venezuela, and we again call upon the Venezuelan military to respect and uphold the Constitution.”                                                    

Today, President Trump also signed an Executive Order prohibiting U.S. persons and others subject to U.S. jurisdiction from engaging in all transactions related to, provision of financing for, and other dealings in any digital currency, digital coin, or digital token that was issued by, for, or on behalf of the Government of Venezuela after January 9, 2018.

As a result of today’s actions, all assets of the following current or former officials of the Government of Venezuela that are subject to U.S. jurisdiction are frozen, and U.S. persons are generally prohibited from dealing with them: 

  • Américo Alex Mata García (Mata) was appointed as an Alternate Director on the Board of Directors of the National Bank of Housing and Habitat, also known as BANAVIH, under the Ministry of Popular Power for Habitat and Housing.  Mata was also the Vice Minister of Agricultural Economics and the President of the Agricultural Bank of Venezuela, both of which attached to the Ministry of Popular Power for Agriculture and Lands.  Mata is a former President of Corpomiranda, a state-owned company known for its role in executing public policies involving the territorial development of and populations inhabiting the area that comprises the state of Miranda, the Tuy River Basin, and the Tovar, Ribas, Revenga, and Santos de Michelena municipalities of Aragua State.  In his role as the coordinator of Maduro’s 2013 presidential campaign, Mata allegedly asked for and received payments from Odebrecht, a Brazilian construction company mired in a worldwide corruption scandal.  Mata allegedly asked for 50 million dollars in the name of the Venezuelan Government, simultaneously guaranteeing Odebrecht contracts for future works.  Odebrecht is reported to have provided 35 million dollars to Maduro’s campaign in 2013.
     
  • Willian Antonio Contreras (Contreras) is the head, or National Superintendent, of the Superintendency for the Defense of Socioeconomic Rights (SUNDDE), the agency responsible for imposing price controls in Venezuela.  Additionally, Contreras is the Vice Minister of Internal Commerce within the Ministry of Popular Power of Economy and Finance.  Due to continued price controls imposed by SUNDDE on businesses ranging from supermarkets to multinational companies, businesses have slowed production or have stopped operating rather than continuing to import raw materials to be incorporated into products that they are ordered to sell for significantly less than the prices typically found in supermarkets.  Contreras has been quoted as stating that SUNDDE implements government-mandated price controls on raw materials and that these laws prohibit the private sector in Venezuela from declaring prices different from the government’s official price determination.
     
  • Nelson Reinaldo Lepaje Salazar (Lepaje), as of mid-March 2018, was acting in the capacity of the Head of the Office of the National Treasury of Venezuela.  Lepaje was formerly delegated the functions of the Assistant National Treasurer, and in that role he was involved in oversight of administrative procedures and the signing of official documents, including financial agreements between the Ministry of Popular Power, the Central Bank of Venezuela, and any national or foreign financial institutions that are auxiliary entities of the National Treasury Office.  Lepaje also authorized the opening of bank accounts with funds from the National Treasury in both national and foreign currencies.  The former National Treasurer, Carlos Erick Malpica Flores, also was designated by OFAC, in July 2017.  In addition, the Venezuelan National Treasury has been the subject of previous corruption allegations, as it was alleged that President Maduro stole nearly $10 million from the National Treasury.
     
  • Carlos Alberto Rotondaro Cova (Rotondaro) is the former President of the Board of Directors of the Venezuelan Institute of Social Security (IVSS), the government agency tasked with providing patients with drugs for chronic conditions.  As a result of Venezuela’s economic collapse under Maduro, the country no longer purchases sufficient foreign medications or produces enough of its own medications.  Due partly to insufficient vaccines and antibiotics, once-controlled diseases like diphtheria and measles have returned, while Venezuelans suffering chronic illnesses like cancer or diabetes often have to forgo treatment.  Venezuela’s healthcare system continues to slide deeper into crisis following years of economic turmoil, spurring outbreaks of treatable diseases and rising death rates.

Links:

OFAC Notice

Executive Order

FAQs – Executive OrderDigital Currency

Treasury Press Release

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