The Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury issued an advisory on September 20 warning U.S. financial institutions of “money laundering schemes used by corrupt Venezuelan officials.” The advisory was addressed to Private Banking Units, Chief Risk Officers, Chief Compliance Officers, AML/BSA Analysts, Sanctions Analysts and Bank Legal Departments, and identified a number of red flags to help financial institutions spot instances where corrupt senior politicians may be attempting to use Venezuelan government contracts to embezzle funds and receive bribes.
If identified during the course of its regulatory and operational due diligence processes, a red flag should alert the financial institution to the heightened possibility of money laundering and warrant further inquiry by the financial institution. The red flags include:
- Transactions involving government contracts that are directed to personal accounts, shell corporations, general trading companies, companies that lack a general business purpose or companies that operate in a line of business unrelated to the government contract.
- Transactions involving the purchase of luxury real estate, particularly in South Florida or Houston, by current or former government officials, their family members or associates.
- Invoices and other corroborating government contract documents that lack traditional details, are overly simple, or include charges that are significantly higher than traditional market rates.
- Payments, especially cash deposits, involving Venezuelan government contracts that originate from accounts in jurisdictions outside of Venezuela.
Although the advisory does not create any new regulatory obligations, FinCEN reminded U.S. financial institutions that, in additional to general account opening due diligence requirements, Anti-Money Laundering and Suspicious Activity Reporting obligations should also be considered when dealing with Venezuelan officials and government contracts.
The FinCEN advisory with a complete list of red flags can be viewed in full here.