Venezuela Set to Join Global Watchdog’s Dirty Money ‘Gray List’

Ben Bartenstein and Andreina Itriago Acosta
·3 min read
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(Bloomberg) -- Venezuela, already under sanctions from the US, is expected to get added to a global watchdog’s “gray list” for not making sufficient progress to stem illicit financial flows.

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The Paris-based Financial Action Task Force is poised to put the South American nation — home to the world’s largest proven oil reserves — on its list as early as June 28, the final day of its plenary in Singapore, according to people familiar with the matter, who requested anonymity as the plans are private.

No final decisions have been made. To avoid the designation, a significant majority of the FATF’s members must agree that a country has made sufficient progress since its evaluation period began. Just a few votes to the contrary can lead to inclusion on the list of nations under increased monitoring, the people said.

FATF’s recommendations are taken seriously because no nation wants to be flagged for deficiencies that might cast doubt on the integrity of its banking system. Those added to the list require closer monitoring and the designation can make foreign investors more wary of doing business there. A 2021 International Monetary Fund report finding that gray-listed countries experienced “a large and statistically significant reduction in capital inflows.”

The designation would add to hurdles for a nation that already faces heavy compliance requirements in the financial sector and elsewhere due to sanctions. The US and the EU are among governments that have sanctioned Venezuela or government officials for corruption, criminal activity or antidemocratic measures.

In early 2022, an assessment team visited Venezuela to prepare the country’s mutual evaluation report. It raised concerns about the money-laundering risks associated with the nation’s large informal economy, including illegal mining. Among the terrorist financing threats highlighted were those tied to the close economic alliance between Caracas and Tehran. (Iran is one of three jurisdictions currently on the FATF’s highest-risk “black list.”)

Monaco Scrutiny

Currently there are roughly 20 countries spanning several continents on the gray list, including Nigeria, South Africa, Bulgaria, the Democratic Republic of Congo, the Philippines and Syria. Monaco is also expected to be added to the list in the FATF’s plenary, Bloomberg reported earlier Friday, also citing people familiar with the matter.

A gray-list classification isn’t as punitive as the black list, and it would suggest that Venezuelan officials are taking steps to address current shortcomings, the people said. The decision comes just weeks before a closely watched election pitting President Nicolás Maduro against opposition candidate Edmundo González, who leads the Chavista by at least 20 percentage points in voter opinion polls.

The FATF didn’t respond to a request for comment. Venezuela’s Central Bank and Information Ministry didn’t immediately respond to requests for comment.

The FATF counts roughly 40 members, though its imprint is much wider. The group’s rulebook for tackling money laundering and terrorist financing applies globally. Founded more than three decades ago at the initiative of the G7, its members include the US and China as well as the European Commission and the Gulf Cooperation Council.

Venezuela — which isn’t an FATF member — was evaluated by its own regional body based on the group’s recommendations. That evaluation, carried out by the Caribbean Financial Action Task Force, and progress made by Venezuela to address its deficiencies will form the basis for discussions during the FATF’s plenary.

--With assistance from Fabiola Zerpa.

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