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Despite sanctions, the networks of Venezuela’s corrupt elite continue to reach the United States

Fresh revelations underscore the need to end anonymous companies, once and for all

Photo of a Miami building by FF16 from Pixabay

Gary Kalman

Director, Transparency International U.S. office

Venezuela’s kleptocrats have been living the high life.

El Feis, a new website by the Organized Crime and Corruption Reporting Project (OCCRP), features highly revealing social media-style profiles of the country’s military and political elite. It shows them partying in St. Barts, living at Caribbean resorts and owning luxury properties in Miami.

#30Jun | ⁦@OCCRP⁩: La gente de El Feis es real. La plataforma y los perfiles fueron construidos por periodistas de OCCRP y al medio digital independiente @EfectoCocuyo https://t.co/Htv4IjOpYw https://t.co/QM0t8rVK6d — Transparencia Vzla (@NoMasGuiso) 30 June 2020

These revelations add to the long list of evidence that should bring home the need for long overdue reforms to the lax U.S. anti-money laundering regulatory environment. Only then will it be possible to detect and act against kleptocrats – such as those featured on El Feis - that breach U.S. sanctions.

The bipartisan Anti-Money Laundering Act of 2020, which is being negotiated in the U.S. Senate this week, would help end the abuse of anonymous companies and, with it, U.S. complicity in transnational corruption.

We can root out corruption by passing the Anti-Money Laundering Act to find out #WhoOwnsIt. Criminals shouldn’t be able to exploit the U.S. financial system for stashing their illicit proceeds. https://t.co/FCtDcTTd3J — Transparency International U.S. Office (@transparencyUSA) 30 June 2020

Known kleptocrats

Some of the individuals profiled on El Feis feature on other lists, too.

Just this week, the Council of the European Union sanctioned 11 Venezuelan officials for “their role in acts and decisions undermining democracy and the rule of law in Venezuela”, adding to the list of 25 officials sanctioned previously, including some featured on El Feis.

To date, the U.S. has imposed sanctions on 144 Venezuelan or Venezuelan-connected individuals, as well as Venezuela’s state oil company and central bank. These sanctions are based on charges such as terrorism, drug trafficking, human rights violations and corruption.

Yet, at the same time, Venezuelan officials have used Florida banks and real estate to launder the proceeds of their illicit activities. In recent years, the U.S. Attorney’s Office in Miami and its partners have brought dozens of such charges against regime officials, resulting in seizures amounting to US$450 million.

Meanwhile, 85 per cent of Venezuelans live in extreme poverty. Many of them also face acute food shortages.

The General

Among those profiled on El Feis is General Vladimir Padrino López, the head of the Venezuelan military. Padrino fits a well-known trope: a self-proclaimed revolutionary who is surrounded by opulence while the people he claims to protect live in poverty.

According to a recent investigation, Padrino is linked to a network of companies and real estate in Venezuela and the U.S. worth millions of dollars. His own social media profile, in contrast, describes him as a soldier determined to build a socialist homeland.

Padrino – like many others profiled on El Feis – is under U.S. sanctions. His inclusion on the Treasury’s Special Designated Nationals List in 2018 should have blocked his assets and prevented U.S. citizens and businesses from having any financial dealings with him.

Yet the investigation into Padrino by OCCRP found a web of 24 businesses in the U.S. and Venezuela, and 14 properties in the U.S. worth almost US$4.5 million.

Among them is Trámites Consulares, a company located in Miami which makes most of its revenue from passport services for Venezuelans, providing a document that is incredibly difficult to obtain in the collapsing country, which Padrino’s politically connected family have been able to profit from.

Nominally, the companies and real estate belong to Padrino’s relatives. The extensive evidence of massive corruption across the upper echelons of Venezuelan society give plenty of reason to suspect that these family members are only proxies for Padrino himself and would need to be named if the U.S. government-collected ownership information.

United States: An anti-corruption paradox

Cases like this expose a paradox at the heart of the U.S. approach to fighting global kleptocracy and corruption. While taking the lead on anti-corruption investigations and enforcement, we allow ourselves to be the financial secrecy jurisdiction of choice for many of the world’s corrupt political elites.

On the one hand, the U.S. is a world leader in seizing and retrieving stolen assets. The Global Magnitsky Act of 2016 allows authorities to place sanctions on and seize U.S.-based assets of people accused of human rights violations or significant corruption anywhere in the world. The Act has inspired similar initiatives elsewhere, including one that is currently under consideration by the European Parliament.

Law enforcement is hampered by regulations that allow companies registered in the U.S. to hide their actual owner. In recent years, the U.S. has been on a downward slope in international measures of both government and business transparency, currently ranking behind only the Cayman Islands as a secrecy haven.

A major factor is that the U.S. does not make companies disclose their “beneficial owners”—those who really control and benefit from the companies. Kleptocrats like Padrino can use strawmen and proxies to hide their assets with impunity, flying under the radar of the very departments that have sanctioned them.

Known solution

There are, however, encouraging signs of progress, such as the Corporate Transparency Act that passed the House of Representatives in November 2019 and the similar Illicit Cash Act, currently before the U.S. Senate.

This week, the U.S. Senate has a historic opportunity to make a meaningful breakthrough.

If enacted, these bills would require companies to disclose their actual owner to a secure database accessible by law enforcement. Banks and other financial institutions will also have access to the information. If someone forming a company is shown to have lied, authorities will be able to take action.

It is clear that those with power in Venezuela inhabit a different world than the ordinary citizens they have pledged to serve. We should not encourage their kleptocracy by offering their corrupt networks safe haven in the U.S.
Gary Kalman Director, Transparency International U.S. office

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