Sometime last year, I wrote about the growing connection between President Chavez of Venezuela and President Ahmadinejad of Iran, and whether their relationship could lead to Venezuela’s placement on the Specially Designated National (SDN) List administered by the United States Department of the Treasury Office of Foreign Assets Control (OFAC). At the time I mentioned that if Chavez and Venezuela’s trade with Iran increased to a point where it was deemed that they were materially assisting Iran in the process of proliferating weapons of mass destruction and/or support of foreign terrorist organizations that some Venezuelan entities and government agencies might find themselves on the OFAC SDN List.

According to a number of recent news articles, it seems that Chavez and Venezuela have caught OFAC’s attention for not only their relationship with Iran, but also for their connection to Muammar Qaddafi and his regime in Libya and other activities.

In 2008, OFAC had implemented sanctions against “two Venezuela-based supporters of Hizballah.” One of them, Ghazi Nasr al Din, had served in senior positions at the Venezuelan embassies in Syria and Lebanon, had “counseled Hizballah donors on fundraising efforts” and “provided donors with specific information on bank accounts where the donors’ deposits would go directly to Hizballah,” a Treasury statement said. The other, Fawzi Kan’an, “met with senior Hizballah officials in Lebanon to discuss operational issues, including possible kidnappings and terrorist attacks. Further, Kan’an has also traveled with other Hizballah members to Iran for training.” According to OFAC Director, Adam J. Szubin, “It is extremely troubling to see the Government of Venezuela employing and providing safe harbor to Hizballah facilitators and fundraisers.”

There are those that believe Iran will be able to end run sanctions by utilizing Venezuela’s established financial system because of banking and financial links between the two nations. One example of this came in June 2008 when Iran opened a bank in Caracas under the Spanish name Banco Internacional de Desarrollo C.A. (BID). It was an independent subsidiary of the Export Development Bank of Iran (EDBI).Within months OFAC targeted the bank for sanctions resulting from the bank’s attempts to provide services to the Iranian Ministry of Defense and its Armed Forces Logistics agency – two military agencies responsible for advancing Iran’s weapons-of-mass-destruction programs, both of which are on the OFAC SDN List.

However, it may not be ties to Iran alone that may lead to OFAC sanctions against Valenzuela and the Chavez Government. There are also reports that the Venezuelan Government has been implicated in narcotics trafficking activities, which calls into question whether some government entities and officials could be targeted for OFAC sanctions under the Foreign Narcotics Kingpin Designation Act (Kingpin Act).

The United States Government Accountability Office (GAO) reported a decline in Venezuelan cooperation with U.S. anti-narcotics efforts over the last five years. Despite U.S. efforts to resume cooperation,this decline has been continuous. According to the GAO:

“According to U.S. and Colombian officials, Venezuela has extended a lifeline to Colombian illegal armed groups by providing significant support and safe haven along the border. As a result, these groups, which traffic in illicit drugs, remain viable threats to Colombian security. A high level of corruption within the Venezuelan government, military and other law enforcement and security forces contributes to the permissive environment, according to U.S. officials.”

If all of the above wasn’t enough, according to former Assistant Secretary of State for Western Hemisphere Affairs Roger Noriega, a secret summit took place in Caracas last August, when Chavez hosted senior jihadist operatives, including Khaled Meshaal, supreme leader of Hamas; Ramadan Abdullah Shallah, secretary-general of Palestinian Islamic Jihad; and the chief of operations for Hizballah, whose name is kept secret. These ties to foreign terrorist organizations could be another cause for OFAC to designate agencies or individuals within the Venezuelan government.

While it seems that the basis for designated exists, OFAC still has not pulled the trigger and implemented sanctions against the numerous Venezuelan parties participating in the activities mentioned above. However, given Venezuela’s continued activity and their support of Qaddafi in the presence of strict OFAC sanctions against Libya, we might soon see the day where OFAC implements sanctions against Venezuela and the Chavez Government.

The author of this blog is Erich Ferrari, an attorney specializing in OFAC matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.