On April 17, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that the Central Bank of Venezuela has been designated as a specially designated national (SDN) under Executive Order 13850, banning all transactions within U.S. jurisdiction in which it has an interest. As a result, any party who materially assists, sponsors, or provides financial, material, or technological support for, or goods or services to or in support of, the Central Bank of Venezuela now risks designation, whether or not the transaction takes place within U.S. jurisdiction.
The designation also applies to any entity in which the Central Bank (alone or together with other SDNs) owns 50% or more, as well as any further subsidiaries of subsidiaries so long as a chain of 50% ownership by sanctioned persons is maintained. This move effectively cuts the Central Bank off from U.S. dollar reserves and clearing services. OFAC simultaneously issued a general license providing a one-month grace period to wind down transactions with the Central Bank, other than withdrawals of the Central Bank’s funds from U.S. accounts, and a general license authorizing certain international humanitarian organizations to continue dealing with the Central Bank. OFAC also amended existing general licenses regarding humanitarian assistance, personal remittances, and credit card processing to allow those activities to continue and amended a number of other general licenses to reflect the new designation.
Additionally, on April 3, 2019, a bipartisan group of fifteen U.S. Senators introduced the Venezuela Emergency Relief, Democracy Assistance and Development Act (the VERDAD Act) to “help restore democracy and address the humanitarian crisis in Venezuela.” If adopted, the VERDAD Act would provide explicit statutory authority for certain of the current U.S. sanctions in place against the Maduro regime but not codify them into law, fund aid to the Venezuelan people, and require sanctions-related reports to Congress.
The bill provides Congressional authorization for, but does not mandate the continuation of, existing sanctions related to new debt and equity of Venezuela and Venezuelan state-owned enterprises, the Venezuelan gold sector, and persons involved in corruption or human rights abuse. The bill does make permanent existing sanctions related to the “Petro” cryptocurrency or any other digital currency, digital coin, or digital token issued by or on behalf of the Maduro regime.
In addition, the VERDAD Act would order the Secretary of the Treasury, the Attorney General, the Secretary of State, the Secretary of Defense, and the Director of the Central Intelligence Agency to expand investigations to facilitate sanctions against narcotics traffickers that are senior members of the Maduro regime, operating in Venezuela, or providing support to traffickers operating in Venezuela.
The VERDAD Act also incentivizes defection from the Maduro regime by providing for the removal of sanctions on officials not involved in human rights abuses if they recognize Interim President Juan Guaidó and the government officials he supervises.
Notably, the VERDAD Act also would require the President to prevent Rosneft from gaining control of “critical U.S. energy infrastructure” through execution on its collateral in CITGO Petroleum Corporation (CITGO) or otherwise. It also calls on the Treasury Department to review CITGO’s transactions with U.S. persons to assess compliance with U.S. sanctions policies and regulations should Petróleos de Venezuela default on its debt obligations.
In addition to sanctions, the VERDAD Act would fund aid to the Venezuelan people, provide for numerous reports to Congress, and provide for a multilateral effort to recover stolen Venezuelan assets.
The timetable and prospects for adoption of the bill are not yet clear.