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Thursday, August 9, 2007

Alert from World Check Regarding Venezuela

Financial Crime Consultant, for World-Check

Alert on Venezuelan bankers with dirty pockets
8 August 2007

The Government of Venezuela has agreed to purchase an additional $1bn of bonds from Argentina this year. Those who follow the Latin American financial structure may recall that Venezuela has already purchased just under $4bn in Argentinian bonds. What is not publicly known is that during prior government bond purchases, certain bankers arbitrarily (and illegally) deducted substantial charges and fees for their own gain. They may be seeking to deposit these ill-gotten gains in your bank. Does this constitute money laundering? What do you think?

The last time funds were illegally diverted from Argentinian bond proceeds, the bankers wasted little time moving some of their ill-gotten gains into US, UK, and offshore financial centre banks. Given the growth of the relationship between Venezuela and Iran this year, the risk of OFAC sanctions has increased. Think ahead, even a couple of years ahead. Which countries in Latin America might be added to the short list of state sponsors of terror?

If you are banking wealthy Caracas bank owners or individuals with senior positions in Venezuelan banks (including foreign bank branches in Venezuela), I would be careful to refrain from accepting any new large sums during 2007, without conclusive and verified evidence and proof of source of funds.

Is this being too careful? accepting suspicious foreign capital is but one indicator of a dysfunctional compliance programme. Watch not what regulators say with respect to fines & penalties for AML failures, but what they do. The next Cease & Desist Order could carry with it a $100m fine in today's regulatory "take no prisoners" climate. A word to the wise is sufficient.

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