Date: Wednesday, November 14, 2018
Location: Miami Airport Hilton, 5101 Blue Lagoon Drive, Miami, FL 33126
Moderator: Guillermo A. Benites, SFBI President, Vice President of Financial Services for United Data Technologies, Inc. (UDT
Panelists: Gabriel Caballero, Partner, Holland & Knight LLP
Daniel Gutierrez, Vice President & Regulatory Risk Manager, Ocean Bank
Javier Alvarez, Partner, ARHMF LLP
(Miami, FL)- South Florida Banking Institute held the last panel of 2018 on November 14, 2018, dedicated to informing attendees on the best practices in dealing with Venezuelan risk. SFBI President Guillermo Benites moderated the panel and introduced panelists Gabriel Caballero, Partner at Holland & Knight LLP, Daniel Gutierrez, Vice President & Regulatory Risk Manager at Ocean Bank, and Javier Alvarez, Partner at ARHMF LLP.
In this panel red flags involving regulatory, risk and compliance matters in financial institutions were discussed. To begin with, Gabriel Caballero analyzed past Executive Orders issued by Presidents in 2015 to present day 2018. Caballero dissected the orders towards the impact they have led in affecting the current financial affairs the United States and Venezuela hold. These Executive orders have been identifying and structuring approaches to corruption and human rights violations. On March 8, 2015 President Obama issued an Executive order, 13692 to block property and suspending entry of certain persons contributing to the situation in Venezuela. President Obama declared a national emergency to deal with the extraordinary threat made from Venezuela to the national security and foreign policy of the United States. This Executive order affected the United States financial affairs in multiple sections as this prohibited the contribution and receipt of funds, goods and services. The Secretary of the Treasury, in consultation with the Secretary of State, is also hereby authorized in order 13692 to determine that circumstances no longer warrant the blocking of the property and interests in property of a person listed in the Annex to this order, and to take necessary action to give effect to that determination. To escalate that order, on August 24, 2017, President Trump issued Executive order 13808, thereby imposing additional sanctions with respect to the situation in Venezuela restricting providing finance. This directly affected all transactions related to, provision of financing for, and other dealings in the following by a United States person or within the United States are prohibited, specifically new debt with a maturity of greater than 90 days of Petroleos de Venezuela, S.A., new debt with a maturity of greater than 30 days, or new equity, of the Government of Venezuela, other than debt of PdVSA covered by subsection. Additionally, bonds issued by the Government of Venezuela prior to the effective date of this order (August 24, 2017); or dividend payments or other distributions of profits to the Government of Venezuela from any entity owned or controlled, directly or indirectly, by the Government of Venezuela, as well as the purchase, directly or indirectly, by a United States person or within the United States, of securities from the Government of Venezuela, other than securities qualifying as new debt with a maturity of less than or equal to 90 or 30 days as covered by subsections of this section, respectively, is prohibited.
On May 21, 2018 President Trump followed up on the previous order to prohibit certain additional transactions with respect to Venezuela. In light of activities of the Maduro regime, including endemic economic mismanagement and public corruption at the expense of the Venezuelan people and their prosperity, and ongoing repression of the political opposition; attempts to undermine democratic order by holding snap elections that are neither free nor fair; and the regime’s responsibility for the deepening humanitarian and public health crisis in Venezuela, President Trump has ordered the prohibition of the purchase of any debt owed to the Government of Venezuela, including accounts receivable; any debt owed to the Government of Venezuela that is pledged as collateral after the effective date of this order (May 21, 2018), including accounts receivable; and the sale, transfer, assignment, or pledging as collateral by the Government of Venezuela of any equity interest in any entity in which the Government of Venezuela has a 50 percent or greater ownership interest. President Trump’s most recent Executive order issued on November 1, 2018 contributed to impose additional sanctions with respect to the situation in Venezuela, such as the purchase of any Venzuelan debt, and imposing a block on involving with operations in the gold sector. Caballero highlighted that financial institutions should be aware of any transactions involving the precious metals industry as a red flag.
In addition, Javier Alvarez relayed information involving nuances regarding to FAQs involving the Executive orders. Alvarez discussed the importance to recognize the type of transfers and provision of services defined in invoices and the structure of agreements. Daniel Gutierrez continued the conversation in the financial institution perspective. Gutierrez described the need of the development of a program to help financial institutions gain clarity of current practices. Gutierrez mentioned the effects are translating into financial institutions creating their own policies to manage the relationships and prohibitions with Venezuela- such as completely not working with Venezuela altogether. Gutierrez discussed the importance of adjustments of internal alerts and training on the institutional and client side. A red flag Daniel mentioned was that millions of Venezuelan nationals are moving to Colombia, affecting the clarity of financial institutional relations with Colombia and the United States. Some solutions to apply are the application of internal intelligence such as research of the companies that own the gold sector industry in Venezuela and the request of supporting documents, risk assessments, cost-effective analysis, and to continuously update your risk assessment to be best acquainted and prepared for audits.