Overview
On March 9, 2015, President Obama issued an Executive Order (EO) that blocks property (i.e., freezes assets) and suspends entry into the United States of seven government officials found to be involved in human rights abuses and/or public corruption in Venezuela. The Executive Order implements and expands upon the sanctions authorized by the Venezuela Defense of Human Rights and Civil Society Act of 2014. The current US sanctions generally do not comprehensively restrict trade or commerce with, or investment in, Venezuela. However, US persons should monitor any further, more aggressive and commercially significant US sanctions, consider enhanced due diligence if transactions, business, or dealings may directly or indirectly involve designated persons or their property and property interests, and evaluate any potential retaliatory action by the Venezuelan government.
Background
On December 18, 2014, the US government enacted the Venezuela Defense of Human Rights and Civil Society Act of 2014 (Act). The Act was passed in response to the deteriorating human rights situation in Venezuela, including the violent crackdown on anti-government protests by the Maduro regime. It requires the President to freeze assets and deny entry into the United States of foreign persons determined to have: (i) perpetrated or ordered significant acts of violence or human rights abuses in Venezuela, (ii) ordered the arrest or prosecution of a person in Venezuela for the legitimate exercise of the freedom of speech or assembly, or (iii) provided material support for, or goods or services in support of, activities listed in (i) and (ii) above. For more information on the Act, please see our previous advisory.
Executive Order
The EO blocks all property and interests in property that are in the United States or are in the possession or control of any US person of individuals or entities (persons) subject to the sanctions. US persons are required to freeze the assets of blocked persons in their possession or control, and essentially cannot engage in transactions or dealings with such persons unless authorized by the Office of Foreign Assets Control (OFAC). Pursuant to guidance issued by OFAC, the property of any entity owned in the aggregate 50% or more by one or more blocked persons is deemed to be blocked. The EO also suspends entry into the United States of persons subject to the sanctions.
The Order authorizes designation of persons determined to:
- Be responsible for or complicit in (i) actions or policies that undermine democratic processes or institutions in Venezuela, (ii) significant acts of violence or conduct that constitutes a serious abuse or violation of human rights, (iii) actions that limit the exercise of freedom of expression or peaceful assembly, or (iv) public corruption by senior Venezuelan officials;
- Be a current or former leader of (i) an entity that has, or whose members have, engaged in any of the above listed activities, or (ii) an entity whose property and interests in property are blocked pursuant to the EO;
- Have provided material support for, or goods or services to or in support of (i) an individual or entity whose property and interests in property are blocked pursuant to the EO, or (ii) any of the above listed activities;
- Be a current or former official of the Government of Venezuela (which includes any political subdivisions or agency such as the Central Bank of Venezuela, as well as any person owned or controlled by, or acting for or on behalf of, the Government of Venezuela); or
- Be owned or controlled by, or acted or purported to act for or on behalf of, any individual or entity whose property and interests in property are blocked pursuant to the EO.
Notably, the EO is broader in scope than the Act, which targeted persons involved in human rights abuses and limitations on free speech and assembly. The EO, in addition to targeting this conduct, also targets senior officials involved in public corruption and authorizes OFAC to sanction any person identified as a current or former official of the government of Venezuela.
The Annex to the EO specifically designates seven Venezuelan officials, including the Director of the National Police, a prosecutor, the current and former Director General of the National Intelligence Service, and current and former leaders of the National Guard and the National Armed Forces. These seven individuals have been added to OFAC’s SDN List. Property and interests in property of these individuals, or of any entity owned 50% or more by them, are now blocked.
There is no “grandfathering” provision in the EO. Therefore, these sanctions apply notwithstanding any contract entered into, or any license granted, prior to March 9, 2015.
Conclusion
The current US sanctions targeting certain Venezuelan officials may not have a significant impact on the trade, commercial, and investment relationship with Venezuela. Nonetheless, US persons should be attuned to increased risks and liabilities if business, transactions, or dealings could involve designated persons or their blocked property. In addition, the Order, which declares the situation in Venezuela to constitute a US national security threat, could signal US willingness to eventually impose more comprehensive sanctions against Venezuela, which may also retaliate against these new US restrictions.
