Legal Risks Associated With Accelerated Investment Opportunities In Venezuela

The Government Enforcement Defense & Investigations (GEDI) team at Foley has been closely monitoring the developing situation in Venezuela. Prior to the recent arrest of Nicolás Maduro, this included the designation of Cartel del los Soles and Tren de Aragua as Foreign Terrorist Organizations (FTOs) under the Immigration and Nationality Act and the addition of multiple individuals and entities the Department of Treasury's Office of Foreign Assets Control's (OFAC) Specially Designated Nationals and Blocked Persons list (SDN List). Following the capture of Maduro, President Trump announced that U.S. oil companies will invest billions of dollars in Venezuela's energy sector, which currently holds the largest oil reserves in the world. While the opportunity for renewed investment in this oil-rich country may seem attractive to many, interested companies should be aware of the accompanying risks prior to embarking on such business ventures.

Although Maduro is no longer in control of the Venezuelan government, the U.S. FTO designations and Venezuela-related sanctions remain in place for now. In addition, Venezuela's oil customers include countries such as China, Russia, and Iran, all of which face their own set of U.S.-imposed restrictions. Entering into such a market exacerbates the existing legal, compliance, and reputational risk of doing business directly or indirectly with FTOs as the U.S. Anti-terrorism Act (ATA) exposes companies that engage in any sort of business with these parties to criminal and civil penalties for "materially supporting" terrorists (18 USC 2331-2339). In addition to this statute, companies will have to maneuver the complex myriad of OFAC sanctions imposed throughout the years related to the Venezuelan government's involvement in narcoterrorism. And, in addition to the U.S. legal and regulatory hurdles that remain, there are international legal considerations as well as the potential for long-term political instability at play. Successfully capitalizing on this opportunity will require a thorough appreciation of the legal issues ahead.

Foley is advising clients on how to manage the evolving situation in Venezuela and is ready to assist companies in mitigating and defending against the risk of an enforcement matter in this space. We combine deep subject-matter expertise with extensive experience handling anti-money laundering and countering the financing of terrorism policies and measures, economic sanctions, supply chain due diligence, compliance risk assessments, and criminal and civil investigations and prosecutions/litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.