In the last few weeks, I have been writing about
corruption in the revolution and how there are so many things going on in the
country allowing a few to get rich, while the revolution looks the other way. Thus,
nothing has changed in Venezuela,
except that before there were independent institutions to denounce and watch
over corruption. Moreover, Venezuelans elected Hugo Chavez in part because he
said he would get rid of corruption, but corruption is worse than ever and
remarkably the revolutionaries are getting richer while allowing their
opponents to share the bounty.
Below, I post the first part of three articles which were
originally posted in complinet and
written by investigator Ken Rijock. Financial institutions have to deal in the
modern world with problems with money laundering, corruption and terrorism. Thus
they have to know their clients and understand the origin of the funds that
move through it. There are regulations to comply with, as well as the ability
to create the rules to eliminate the risk of dirty money flowing through your
institutions. Complinet helps British institutions do this by providing
training, databases of individuals and institutions that have to be monitored
and avoided as well as creating the environment for institutions to prevent the
flow of such funds through it. These three articles were published originally
in complinet, apparently as an example of the difficulties created by
Government corporations when they move money around the world. Remarkably, the example
given is that of Venezuela.
For those that don’t know, PEP means Politically Exposed Person, one category
that those opening accounts in financial instutions have to watch out for in particular.
These articles appeared in vcrisis in three parts (1,2,3) as well
as in IVAC but both were posted during the
holidays and unfortunately I missed them. I repost them here, because the charges
made in them are quite serious but they are very specific and precise and should at least be investigated,
in a country where lawlessness seems to be the rule of the day under the
watchful eye of those that are supposed to keep Government and corruption in
check. This is part I. Part II and III will be posted in the next few days.
PEPwatch: Beware of
government-controlled private corporations (Part 1)
By Ken Rijock, Originally appeared in COMPLINET
One of the most perplexing
phenomena for money laundering reporting officers and compliance officers is
the government-controlled corporation for profit, a prominent feature of the
Venezuelan Government’s recent attempts to launder money. Such corporations are
dangerous to Western financial institutions when their officers try to conceal
government ownership or control.
When a bank realises that
it is dealing with such a company, it knows immediately that its officers,
directors and agents rank as “politically exposed persons”. They
probably have access to “arranged” financing, public treasury
receipts, illicit funds and sundry other corrupt or criminal profits that they
can divert to the company’s accounts. The sources of these funds can range from
money stolen by the officers of the corporation to money laundered on the
orders of government agencies or leaders. At the same time that this happens,
the affiliated and subsidiary firms owned by a governmental, though private,
entity become high-risk companies in their turn. They require an extremely
“enhanced” form of “due diligence” before any bank can
accept them as customers.
Towards a command economy
The government of Venezuela
currently enjoys high-risk status. Its six-year history is littered with instances
of missing oil revenues, the diversion of funds to support and encourage
political chaos in the Western Hemisphere,
cooperation with Colombian terrorist groups such as FARC and the ELN, and more.
Any company or group that the government controls or owns beneficially must
also pose a high risk. Compliance departments must therefore insist on treating
the leaders of such companies as PEPs automatically. They must subject them to
the deepest of enquiries into the sources of their funds, whether in their personal
accounts or in company accounts located overseas. Venezuela-watchers believe
that the Chavez government is moving the country towards a command economy on
the Cuban model and is trying to acquire monopolies in crucial industries that
are presently in private hands. In one such area, the production and
distribution of food, it is believed that groups fronting for the government
are now acquiring some of the major companies.
Not just the usual suspects
The country’s major
“agribusiness” organisation is Grupo PROAREPA, which is the main food
supplier for the government’s food assistance and distribution programs, CASA
and MERCAL. Grupo Proarepa owns a number of companies, including at least one,
ALMACENES Y TRANSPORTES CEREALES or ATC. Venezuelan web bloggers and other
commentators believe that Adan Chavez, the brother of Venezuelan President Hugo
Chavez, owns this subsidiary beneficially. Adan is the Venezuelan Ambassador to
and an avowed Marxist. The group is also closely aligned with Argenis, another
of the Chavez brothers. That these individuals are high-risk PEPs is
There are several
“giveaways” that suggest that the government is controlling Grupo
Proarepa. People at the top in Venezuela
have used it to cover up a criminal investigation and have prevailed upon it to
turn a blind eye to tax evasion. In 2003 they also prevailed upon the National
Assembly to vote for a very suspicious credit, in the amount of $ 41,833.702,
to subsidiary PROFINCA. At the time, the subsidiary appeared to have no assets.
On the same day, the two speakers whose job it was to pilot the relevant bill
gave the chamber conflicting reasons for wanting the subsidy. Now, on to the
listed pro-Chavez group leadership. The “officers of record” ? i.e.,
the listed officers, of PROAREPA and its many subsidiaries ? are a curious cast
of characters. /Cedula/ numbers are national identity numbers.
Beloune Arslanian, cedula 9280364, born on January 1 1953, is a
Venezuelan of Syrian extraction who was deported from the United States
and had his visa cancelled on December 6 2004. Such an extreme action generally
only occurs when US
law enforcement authorities have strong evidence of continuing criminal
activity. There are reports that he is under investigation for trading in
narcotics and laundering money.
Fernandez Barrueco, cedula 9095496, born on April 9 1965, a
Venezuelan who possesses passports under both his Venezuelan citizenship and
that of a Colombian with a similar name, whose identity he is known to use. He
has accumulated a substantial fortune in an amazingly short time and associates
with such members of Chavez’s inner circle as Diosdado Cabello, the governor of
Miranda State, and President Hugo Chavez’ father and brothers. A Venezuelan
government criminal investigation by the national intelligence agency, DISIP,
of FERNANDEZ’S activities was terminated mysteriously in February 2001.
FERNANDEZ was being investigated for customs offences and other crimes related
to “agribusiness”. He authorised multi-million-dollar deals with
PROAL, the government food entity.
(retired) Gustavo Adolfo Sanchez Gonzalez, cedula 4115600, born
March 5 1956, who was the director of PROAL at the time of the DISIP
investigation. SANCHEZ is an officer of American Air Conditioning, a Floridian
corporation, as are Fernandez and Arslanian.
Other persons associated
with the Proarepa Group, and thus holding PEP status, are Bernard Gerald, Angel
Fuentes Fragile, and the brothers, Adan, Edwin and Abraham Easer. The companies
that are part of PROAREPA are listed below. There are many of them and they are
of recent vintage; only three of them date to before 2000. Because most of them
were set up after the advent of the Chavez government, they must all be
considered as government entities for compliance purposes.
Venezuelan Government-controlled corporations
1 CORPORACIÓN TUREN.
2 COMMERCIALIZADORA DE GRANOS VENEZUELA R.S., C.A.
3 INVERSIONES MAJAGUAS R.S., C.A.
4 DISTRIBUIDORA LE MUST
5 VENARROZ R.S.A.C.A.
6 FB VALORES Y COMISIONES 1177 C.A.
7 INDUSTRIA VENEZOLANA MAIZERAPROAPEPA
8 VENEZOLANA DE GRANOS RSCA, C.A
9 ALMACENES Y TRANSPORTES CEREALEROS – (A.T.C.) C.A.
10 ROTCH ENERGY HOLDINGS
INC. (See note *)
11 AMERICAN AIR
CONDITIONING DE VENEZUELA C.A
12 MANTENIMIENTOS CONCRETA S.R.L.
13 AMERICAN AIR
CONDITIONING INTERNATIONAL INC.
15 GANADERIA LOS BUFALOS DEL DELTA C.A.
16 CORN MILLS ANDINA, C.A.
17 INVERSIONES PORTENAS, C.A.
18 GANADERIA EL GRAN CEBU, C.A.
19 GRANOS DE VENEZUELA, LTD., C.A.
20 PRODUCTOS Y FINANCIAMIENTO AGRICOLA ( PROFINCA)
21 AMERICAN FOOD GRAIN
22 SERVICIOS PROARFE C,A,
23 CONSORCIO AGROPECUARIO VENEZOLANO C.A ( COAVE).
24 MANTENIMIENTOS POLIPLAST S.R.L.
25 CORPORACIÓN AGROPECUARIA INTEGRADA COMPANIA ANONIMA (CAICA).
26 MANTENIMIENTOS 2050 S.R.L.
27 DERIVADOS DE MAIZ SELECCIONADO, C.A. (Demaseca)
* This is a
Curaçao-registered company that is an authorised PDVSA broker. It is also the
vehicle through which Fernandez purchased a 50 per cent stake in Demaseca, a
subsidiary of Mexican food giant Gruma.
The Proarepa Group is
reputed to have as many as 40 overseas bank accounts, many in tax haven
jurisdictions such as Switzerland,
the Channel Islands and the Cayman Islands.
Complinet’s sources say that it focuses its efforts almost entirely on domestic
food production and distribution. Why, then, does it maintain such an extensive
network of offshore accounts? This should raise a major “red flag”
for compliance officers. MLROs and compliance officers should be mindful of
powerful private companies from countries where governmental influence intrudes
into the private sector, for they may very well be dealing with a wolf in
sheep’s clothing. Financial institutions that bed down with corrupt PEPs always
seem to have to suffer a barrage of bad publicity. They should therefore demand
proof positive of beneficial ownership whenever they encounter suspect
companies. This evidence should include sworn affidavits signed by partners of
major law firms and accounting organizations. Even then, they should verify the