Friday, November 25, 2011


Venezuela has seen its share of cleverly forged instruments sting foreign investors; bogus bonds, promissory notes and other purportedly legitimate negotiable instruments, so forgive me if I ask that someone verify that the $2bn Sovereign Guarantee, allegedly issued by the Central Bank of Venezuela, in favour of a new Isle of Man company, is valid and has value.

The story, as it appears on the blogs, is that the money was destined for charitable purposes, the first one being the construction of a hospital in St. Kitts. A letter, ostensibly written by a US law firm, has strangely appeared, as well as a number of additional "Red Flags" that should cause a compliance officer performing due diligence to avoid the transaction entirely. Some, but not all, of the participants have declined to talk to the press.

Whilst the truth is often elusive in the world of financial crime, let me point out two constants:

(1) If the documents are real, a charitable activity in the billion dollar range, but vague in scope, on the part of a national bank of a country known to be riddled with corruption, screams corrupt diversion of government funds and/or money laundering.

(2) If this is a bogus transaction, it is well-documented fraud, intended to fool third parties, expertly prepared, with inside information on the workings of Venezuela's central bank. If so, who or what is the intended target ?

Venezuela's economy is reeling; the president of its central bank could not prudently authorise this level of charitable gift when his own country has needy citizens. is this simply a sophisticated means of moving government funds offshore, before President Chavez dies, and his utterly corrupt regime collapses ? we cannot say, but if you see any sort of "unusual" transaction originating from Venezuela, think long and hard before agreeing to participate; you may get badly burned.

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