February 19, 2019

Treasury Designates Additional Maduro Officials, Provides Additional Guidance

Holland & Knight Alert
Gabriel Caballero Jr. | Andres Fernandez | Jonathan M. Epstein | Ronald A. Oleynik


  • The U.S. Department of the Treasury's (Treasury) Office of Foreign Assets Control (OFAC) has designated five officials affiliated with the regime of Nicolas Maduro pursuant to Executive Order 13850 (E.O. 13850), including the current Venezuelan minister of petroleum and mining and president of state-owned petroleum company Petroleos de Venezuela, S.A. (PdVSA).
  • OFAC has published amendments to general licenses and guidance regarding transactions related to dealings in certain securities and the Venezuela-related sanctions.
  • These actions raise new issues regarding dealings with the government of Venezuela, including with respect to the authority of certain Venezuelan governmental officials.

The U.S. Department of the Treasury's (Treasury) Office of Foreign Assets Control (OFAC) has designated five officials affiliated with the regime of Nicolas Maduro pursuant to Executive Order 13850 (E.O. 13850) for allegedly continuing to repress democracy and democratic actors in Venezuela and engaging in significant corruption and fraud against the people of Venezuela. These designations, announced on Feb. 15, 2019, target members of Maduro's inner circle, security and intelligence forces, as well as the current Venezuelan petroleum minister and president of state-owned petroleum company Petroleos de Venezuela, S.A. (PdVSA).

These actions follow the designation of PdVSA on Jan. 28, 2019, and reinforce previous efforts by the U.S. Departments of Treasury and State to characterize Maduro's regime as "illegitimate" and certify the authority of Venezuela's Interim President Juan Guaido. (See Holland & Knight alert, "OFAC Designates Petroleos de Venezuela S.A.; U.S. Expands Sanctions on Venezuelan Government," Jan. 30, 2019.)

The designated individuals, include:

  • Ivan Rafael Hernandez Dala, commander of Maduro's Presidential Guard and commander of Venezuela's Directorate General of Military Counter-Intelligence
  • Manuel Ricardo Cristopher Figuera, director general of the Venezuelan National Intelligence Service
  • Hildemaro Jose Rodriguez Mucura, first commissioner of Venezuelan National Intelligence Service
  • Rafael Enrique Bastardo Mendoza, commander of a Venezuelan National Police Unit commonly referred to as the Special Actions Force and lieutenant colonel of the Venezuelan National Guard
  • Manuel Salvador Quevedo Fernandez, current president of Venezuelan state-owned oil company, PdVSA and Venezuelan Minister of Petroleum and Mining

The rationale described by OFAC for the designations suggests the individuals were designated for, among other things, being "aligned" with Maduro and for prior actions involving alleged human rights abuses or corrupt practices. Also worth noting is that some of the designated individuals had replaced prior Venezuelan government officials that had been designated under previous executive orders, including E.O. 13692.

In its press release regarding these designations, the Treasury stated that:

"U.S. sanctions need not be permanent; sanctions are intended to bring about a positive change of behavior. The United States has made clear that we will consider lifting sanctions for persons designated under E.O. 13692 or E.O. 13850 who take concrete and meaningful actions to restore democratic order, refuse to take part in human rights abuses, speak out against abuses committed by the government, and combat corruption in Venezuela." (emphasis added)

Although significant uncertainty remains, Treasury's statements suggest that a policy reversal for Venezuela could be on the horizon should consensus be reached by Venezuelan government officials (including members of the Maduro regime) in the recognition of Interim President Guaido's administration.

These designations effectively block all of the property and interests in property of the designated individuals to the extent that they come within the possession or control of any United States person (including U.S. financial institutions).

OFAC Issues Amended General Licenses and Additional Guidance

On Feb. 11, 2019, OFAC issued General License 3C, "Authorizing Transactions Related to, Provisions of Financing for, and Other Dealings in Certain Bonds," and General License 9B, "Authorizing Transactions Related to Dealings in Certain Securities." Additionally, OFAC revised frequently asked questions (FAQs) 650, 661 and 662.

  • General License 3C supersedes and replaces General License 3A, and authorizes, among other things U.S. persons to engage in all transactions related to, the provision of financing for, and other dealings in the bonds specified in the Annex to General License 3C, provided that any divestment or transfer of, or facilitation of divestment or transfer of, any holdings in such bonds be to a non-U.S. person absent authorization from OFAC.
  • General License 9B authorizes, among other things, U.S. persons to engage in all transactions and activities that are ordinarily incident and necessary to dealings in any debt (including, but not limited to, the bonds listed in the Annex to General License 9B) of, or equity in, PdVSA, or any entity directly or indirectly owned 50 percent or more by PdVSA that was issued prior to Aug. 25, 2017 (together, PdVSA securities), provided that if a U.S. person decides to sell or transfer any interests in such securities, it must sell or transfer the interests to a non-U.S. person absent authorization from OFAC.
  • FAQs 661 and 662 clarify that these authorizations include engaging in transactions related to the receipt and processing of interest or principal payments, and acting as a custodian for U.S. and non-U.S. persons' holdings in such bonds/securities, including acting as a custodian for a non-U.S. person after that person has received PdVSA securities from a U.S. person in a divestment transaction.
  • FAQ 661 also clarifies that U.S. persons may continue to hold their interests in PdVSA securities, but are subject to certain restrictions on the sale of those interests in the secondary market. General License 9B does not generally authorize U.S. persons to purchase or acquire new interests in PdVSA securities, and as a result, such purchases are prohibited absent authorization from OFAC. FAQ 650 provides guidance on due diligence expectations when ensuring that transfers or divestment of debt (and, in the case of General License 9B, equity) in certain blocked persons (in the case of General License 9B) or the government of Venezuela (in the case of General License 3C) are consistent with the terms of these general licenses.

For further assistance or answers to questions related to these matters, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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