(Bloomberg) — Venezuela, already under U.S. sanctions, is expected to be added to a global watchdog’s “gray list” for not making enough progress to curb illicit financial flows.
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The Paris-based Financial Action Task Force is poised to list the South American country – home to the world’s largest proven oil reserves – as early as June 28, the last day of the plenary meeting in Singapore, according to people who are familiar with the matter, who requested anonymity because the plans are private.
No final decisions have been made. To avoid this designation, a significant majority of FATF members must agree that a country has made sufficient progress since the beginning of the review period. Just a few negative votes could lead to inclusion on the list of countries under enhanced surveillance, the people said.
The FATF recommendations are taken seriously because no country wants to be highlighted for shortcomings that could cast doubt on the integrity of the banking system. Those added to the list require closer scrutiny and the designation could make foreign investors more wary of doing business there. A 2021 International Monetary Fund report found that countries on the gray list experienced “a large and statistically significant reduction in capital inflows.”
The appointment would increase hurdles for a country that already faces tough compliance requirements in the financial sector and elsewhere due to sanctions. The US and EU are among the governments that have imposed sanctions on Venezuela or government officials for corruption, criminal activity or anti-democratic measures.
In early 2022, an assessment team visited Venezuela to prepare the country’s mutual evaluation report. Concerns were raised about money laundering risks associated with the country’s large informal economy, including illegal mining. Among the terrorist financing threats, threats related to the close economic alliance between Caracas and Tehran were noted. (Iran is one of three jurisdictions currently on the FATF’s highest-risk ‘blacklist’.)
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Currently, roughly twenty countries across several continents are 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 plenary, Bloomberg reported earlier Friday, also citing people familiar with the matter.
A gray list classification is not as punitive as the black list and could indicate Venezuelan officials are taking steps to address current shortcomings, the people said. The decision comes just weeks before closely watched elections pitting President Nicolás Maduro against opposition candidate Edmundo González, who is leading Chavista by at least 20 percentage points in voter opinion polls.
The FATF did not respond to a request for comment. Venezuela’s Ministry of Central Bank and Information did not immediately respond to requests for comment.
The FATF has roughly forty members, but its influence is much broader. The group’s rulebook for tackling money laundering and terrorist financing applies worldwide. The organization was founded more than thirty years ago at the initiative of the G7 and includes the US and China, as well as the European Commission and the Gulf Cooperation Council.
Venezuela – which is not a member of the FATF – was evaluated by its own regional body based on the group’s recommendations. This assessment, conducted by the Caribbean Financial Action Task Force, and the progress Venezuela has made in addressing its shortcomings will form the basis for discussions at the FATF plenary.
–With help from Fabiola Zerpa.
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