Feb 26, 2019

Venezuela sanctions pose risks for financial institutions

The continually escalating U.S. sanctions on Venezuela have created problems for more than just the country's president and his inner circle. They are creating "new compliance risks for U.S. and international financial institutions," the Wall Street Journal's Mengqi Sun writes.

Why it matters: Venezuela's state oil company, PDVSA, which has been the target of some sanctions, has many subsidiaries and outsources much of its business to third-party vendors. That means banks are picking over transactions and potential customers with a fine-tooth comb, said Daniel Gutierrez, who chairs the anti-money-laundering compliance committee at the Florida International Bankers Association.

  • Banks are responsible for vetting their customers to ensure they don't have relationships with people or companies on the sanctions list and to flag and block questionable transactions.

The big picture: "The question the industry has is how far down that outsourcing chain do I have to go to determine if I have a sanction on Venezuela or not," Gutierrez said.

  • The deep connections between the U.S. and Venezuela in the oil industry goes much deeper than simply paying for gas. The sanctions can affect automobile and heavy machinery manufacturing, as well as elements of insurance and finance, said Cari Stinebower, a sanctions lawyer at Crowell & Moring LLP, tells WSJ.
  • "Anyone that touches the petroleum industry is affected by the sanctions, " Stinebower said.

Go deeper: U.S. sanctions Venezuela's state oil company in push for regime change

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