Jarrett Wolf president with Wolf Global.

On Aug. 5, the president of the United States issued Executive Order 13884, blocking all property of the government of Venezuela in the United States. Banks, companies and individuals, in the United States and worldwide, especially those engaged in international business, should understand what the executive order means, why it’s important to be aware, and what to do.

What the New Venezuela Sanctions Mean

Although there are exceptions, in general terms, the order blocks all property of the Venezuelan government in the United States, that comes within the United States, or that is or comes within the possession or control of any U.S. person or entity.

For purposes of the order, the government of Venezuela includes:

• The state and government of Venezuela;
• Any political subdivision of the government of Venezuela;
• Any agency, or instrumentality of the government of Venezuela, including the Central Bank of Venezuela and Petroleos de Venezuela, S.A. (PdVSA); and
• Any person or entity owned or directly controlled by any of the foregoing.

The order also blocks the property and interests in property of:

• Any person or entity determined to have materially assisted or provided financial, material or technological support for, or goods or services to or in support of, any specially designated national; and
• Any person or entity determined to be owned or controlled by, or to have acted or purported to act for or on behalf of, any person whose property and interests in property are blocked pursuant to the executive order.

As of the time of this writing, more than 200 persons or entities are designated as specially designated nationals under the Venezuela programs of the Department of Treasury’s Office of Foreign Assets Control (OFAC).

Why You Need to Be Aware

Cases involving sanctions violations can result in fines, forfeitures and civil monetary penalties, and in some cases, corporate or individual criminal liability.

Although it might seem counterintuitive, aware of the condition of the Venezuelan economy, the same entities and individuals targeted by the order and by sanctions might attempt to get their money out of Venezuela and into more stable economies, including in the United States. To do so, they might employ intermediaries. U.S. persons, meaning U.S. banks, companies and individuals, as well as non-U.S. persons transacting business in U.S. dollars, need to be aware of the risks this creates.

Likewise, because they are blocked from the U.S. financial system, entities and individuals of the Venezuelan government might also use intermediaries not only to acquire goods or services from the United States, but to acquire goods or services from around the world, in transactions involving U.S. dollars and, therefore, in violation of the executive order.

What You Can Do

• Implement a sanctions compliance program.

Banks and companies, particularly companies engaged in international business or serving international clients or customers, should develop and implement a sanctions compliance program. The program should be risk-based, meaning it should be proportionate to the risk profile of the bank or company.

As described by OFAC earlier in 2019, the five essential elements of a sanctions compliance program are:

• Management commitment;
• Risk assessment;
• Internal controls;
• Testing and auditing; and
• Training.

The time to implement a sanctions compliance program is now, not after a violation.

• Conduct an Internal Investigation.

There are two ways a company can learn it may have violated U.S. sanctions. The company might discover a possible violation on its own; or the company might learn that it has become the subject or target of an investigation by the U.S. government.

If a company discovers on its own that it might have violated U.S. sanctions, then an internal investigation should be conducted by qualified professionals to determine whether there has, in fact, been a violation and whether disclosures will need to be made.

If the company is notified that it has become the subject or target of an investigation by the U.S. government, then a dialogue should be opened with the U.S. government and, again, an internal investigation should be conducted.

If the investigation reveals evidence which would negate the concerns of agents and prosecutors, then that evidence can be presented to the agents and prosecutors, through counsel. Conversely, if the investigation reveals evidence confirming a violation, then counsel can work to legally and ethically resolve the matter.

Venezuela sanctions are intended to advance U.S. foreign policy objectives. As with all executive orders calling for the blocking of property and implementation of sanctions, the Departments of State and Treasury would rather see companies comply, than have to see the OFAC or the Department of Justice investigate, bring enforcement actions or prosecute violations.

Jarrett Wolf, based in Miami and New York, is the president of Wolf Global, an advisory and consulting firm focused on corporate investigations, crisis management, risk mitigation and strategy, for U.S. and international clients and their counsel. He can be reached at [email protected].