When is a forex crime not actually a crime? When you've decriminalized it, that's when.
Just a year ago, Venezuela effectively decriminalized parallel Forex trading. Half the government seems to have forgotten they did that, the other half seems to be regretting it.
At the beginning of November Francisco Torrealba, a member of the National Assembly for the governing PSUV, filed a complaint before the prosecutor’s office to have fellow congressman Tomás Guanipa investigated for financial crimes.
The allegation is that Mr. Guanipa, a leading member of opposition party Primero Justicia, is involved in a scheme to destabilize Venezuelan economy plotted by Dolar Today —the go-to website to find out the price of a dollar on the parallel market.
Guanipa’s alleged sin was proposing to “dollarize” salaries in order to fight inflation.
This all sounds mighty strange. Guanipa was simply sounding like a demagogue, but being a demagogue has never — ever — been a crime in Venezuela. And neither is paying with dollars.
Torrealba seems to have forgotten a basic fact of Venezuela’s Forex control system: are no penalties for buying or selling foreign currency at the parallel rate. For all the talk about economic war, there are no penalties written into law for these kinds of irregularities. Zip, none.
Why? Because thanks to the good offices of what we used to call the “pragmatic” wing of the Maduro administration, some Foreign Exchange Control regulations were relaxed a couple of years ago.
A year ago the law was reformed explicitly to take the penalties out, and to decriminalize parallel trading as such. Hell, they even changed the name of the law from Law Against Exchange Crimes to Exchange Regime Law (and its Crimes) so it wouldn’t be understood as a mechanism of punishment but a regulation device. A law that had been all about persecuting Forex Crimes became a handbook for how to obtain Dollars at the preferential rate.
For some time now, enforcement activities regarding financial crimes have concentrated on tracking the use of foreign currency legally obtained at the lower rates, rather than on stamping transactions performed in the parallel market.
The government seems to be regretting that decision now. In part, that’s because the Economic War narrative depends on a constant supply of wild allegations to stay alive, and as the opposition takes an enormous lead heading into legislative elections, the government seems to be rediscovering the joys of penalizing parallel rate trading.
Days after Torrealba’s outburst, during a recent “Contacto con Maduro” broadcast, the president said that black market foreign exchange transactions required harsher penalties — which ought not to be hard since, remember, there are currently none. He also said that a new exchange crime should be enacted to punish anyone who fixes parallel market rates “with no legal basis.”
Wait, what? You mean, Dólar Today, the Maduro administration Nemesis, has been operating legally all along? Get out!
But the show must go on. As Gustavo recently wrote, Sudeban (the Venezuelan Banking Regulatory Authority) has finally requested that banks hand over “all the technical information regarding electronic transactions, including the IP addresses involved in any e-operation.” With this aggressive move, the government seems to be targeting black market transactions by trying to identify the parties involved in a crime that doesn’t yet exist.
In 2010, the Banking Law was modified and Bank Secrecy, as we knew it, disappeared. The current law allows almost every public authority in the country, through Sudeban, to tap into the banking information of any citizen.
Crazy as it sounds, the government is really following a bit of an international trend. Western countries have been relaxing bank secrecy and privacy safeguard to fight terrorism and financial crimes. It’s just that in normal countries the terrorists and criminals work against the state, not for it.
SENIAT, Venezuela’s tax-collecting agency, has long had broad authority to hound tax evaders by civil procedure rules with little- to- no limitation. In fact, the tax administration could hunt down Economic War criminals to the ends of the world, if only they would tap into some of the exchange of information clauses embedded into the large network of double tax treaties that Venezuela has with many nations of the civilized world … -YES!
Otra obra de la cuarta.
Don’t panic, though.
A couple of years ago I had the chance to have a sitdown with the guy that receives the requests for information submitted by other countries. He showed me how he copy/pasted the same answer to every single foreign tax administration.
“We do not have that individual in our records.”
He explained that SENIAT was up to its neck with local tax collection and didn’t have time to deal with these sophisticated matters. Plus, they didn’t have the best relations with the countries posting the requests. Most of these dealings are based on reciprocity, good communication between tax administrations, and healthy diplomatic relations. None of which the Venezuelan government currently has with any nation that may matter in this context.
Now imagine how far a little tweaking in foreign policy would go. Imagine the billions of dollars that could be tracked down and recouped from las compañías de maletín. Imagine the sting on corrupt politicians involved in PDVSA’s infamous wealth syphoning in Europe. [And let’s not talk about the possibilities against drug smuggling.]
As imagination is the dwelling of fantasy, let’s get back to reality.
Venezuela is a country where an international economic scandal can uncover that Venezuelan public funds have been parading merrily in banks all over Europe, and our head prosecutor reacts by just playing dumb. “We are requesting that the Swiss Bank HSBC, as I believe it’s called, [provide] information about Venezuelan public officials that have accounts with this bank…” The terror.
For now, big time white collar criminals may rest assured that no one will come for them.
The government is ill equipped to fight the economic war it created. The only resource it actually has is bullying. And bullying, at this stage, is only useful to harrass political adversaries like Tomás Guanipa.
The white collar guys can rest at ease.
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