In 3 May 2019, FINCEN issued an update to a 2017 “Advisory on Widespread Public Corruption in Venezuela.”  It served to reinforce the widespread corruption in the unstable nation while alerting financial institutions to additional methods “utilized by corrupt Venezuelan senior political figures to move and hide corruption proceeds.”  FINCEN’s primary example in this advisory was the misuse of Venezuela’s government-sponsored food distribution program (CLAP).    

According to FINCEN, the Maduro regime began to use the program as a political weapon forcing citizens to choose between supporting the current government or starvation.  It was also uncovered that government officials profited from the program through embezzlement and price manipulation schemes involving trade-based money laundering (TBML), and front and shell companies. 

In October 2018, the AP reported that Mexican prosecutors had found “that the Venezuelan officials and Mexican businessmen bought poor quality items in bulk and exported them to Venezuela at more than double their real price.”   Their investigation uncovered corruption and improper practices dating back years.  “The U.S. Treasury estimates at least 70 percent of the CLAP program is being gutted by corruption, citing evidence of overbilling.”

To help curb the corruption and fraud surrounding Venezuela, FINCEN identifies specific red flags to help financial institutions with reporting, including but not limited to the following:  

  • Transactions involving government contracts that are directed to personal accounts
  • Transactions involving government contracts that are directed to an entity engaged in an unrelated industry
  • Transactions involving government contracts that originate with, or/are directed to, entities that are front and shell corporations, general “trading companies” or those that lack a general business purpose
  • Documentation corroborating transactions involving government contracts (e.g. invoices) that include charges at substantially higher prices than market rates or that include over-simplified documentation or lack of expected details
  • Payments involving government contracts that originate from non-official Venezuelan accounts, particularly accounts located in jurisdictions outside of Venezuela (i.e. Panama or the Caribbean) and held by offshore financial institutions (i.e. in Dominica)