The Executive Vice President of Venezuela, Tareck Zaidan El Aissami Maddah (El Aissami), was designated on Monday by the U.S. Department of Treasury as a Specially Designated Narcotics Trafficker under the Foreign Narcotics Kingpin Designation Act (Kingpin Act). According to the Office of Foreign Assets Control (OFAC), El Aissami directly facilitated significant shipments of drugs from Venezuela into the United States and Mexico, and helped and protected other drug dealers operating within Venezuela. OFAC also has alleged that El Aissami’s “primary frontman,” Samark Jose Lopez Bello, oversaw the finances of these operations and launders drug proceeds through “an international network of petroleum, distribution, engineering, telecommunications, and asset holding companies.”
After providing some additional details regarding these designations, we will discuss the Kingpin Act itself, a powerful and unique enforcement tool.
In addition to targeting El Aissami and Lopez Bello, OFAC also has designated, or identified as blocked property, 13 companies allegedly owned or controlled by Lopez Bello; these entities are located within the United States, Venezuela, the British Virgin Islands, Panama, and the United Kingdom. Broadly, the effect of OFAC’s designations and blockings will be to prohibit U.S. individuals and entities from dealing with El Aissami, Lopez Bellow, and the listed entities. Further, assets in the U.S. held by these individuals and entities are frozen. The blocked properties highlight the continued interest of the U.S. government, which we have noted previously, in enforcement actions against the alleged use of U.S. real estate and LLCs to launder illicit proceeds from abroad.
OFAC has set forth this chart on the two individuals and the relevant entities:
This action represents a major step against a very high ranking foreign government official. The President of Venezuela, Nicolás Maduro, named El Aissami as Vice President in early January 2017. Reportedly, these designations by OFAC have been years in the making. The government’s press release quoted John E. Smith, the Acting Director of OFAC, as stating that the designations represent “the culmination of a multi-year investigation under the Kingpin Act to target significant narcotics traffickers in Venezuela and demonstrates that power and influence do not protect those who engage in these illicit activities [.] . . . This case highlights our continued focus on narcotics traffickers and those who help launder their illicit proceeds through the United States. Denying a safe haven for illicit assets in the United States and protecting the U.S. financial system from abuse remain top priorities of the Treasury Department.”
We now turn to the Kingpin Act itself. The Kingpin Act, set forth at 21 U.S.C. §§ 1901 to 1908, grants OFAC the authority to freeze any U.S.-based assets of alleged foreign narcotics traffickers and their organizations, and to prosecute U.S. citizens who help transact the ill-gotten gains – or, more broadly, to prosecute anyone who conducts or causes a related transaction to occur within the United States. Its objective is to enable the government to move swiftly to weaken large-scale international drug traffickers, in part by streamlining the process of identifying offenders and imposing sanctions. In particular, the Treasury Department, in consultation with the Attorney General, the Director of Central Intelligence, the Director of the Federal Bureau of Investigation, the Administrator of the Drug Enforcement Administration, the Secretary of Defense, and the Secretary of State, designates foreign “kingpins” who “play a significant role in international narcotics trafficking.” Likewise, the President submits an annual public report to Congress identifying persons for whom sanctions are deemed appropriate. The process of designation and blocking property is not subject to prior public hearings or Congressional approval.
All designations to date under the Kingpin Act are catalogued by OFAC here.
At 21 U.S.C. § 1904(c), the Act prohibits any transaction or dealing by a U.S. person, or any transaction or dealing within the United States, in property or interests of anyone designated under the Act. The Act similarly prohibits any such transactions designed to evade or avoid the Act’s prohibitions, as well as related attempts and conspiracies. Violations of the Act can be criminal. Under 21 U.S.C. § 1906(a)(1), a willful violation of the Act or “any license, rule or regulation issued pursuant to this chapter,” is a felony punishable by up to ten years in prison, as is the willful neglect or refusal “to comply with any order of the President issued under this chapter[.]” Moreover, the statutory maximum sentence of imprisonment increases dramatically to 30 years in the case of any “officer, director, or agent of any entity who knowingly participates in a violation” of the Act. Civil violations of the Act can result under 21 U.S.C. § 1906(b) in monetary penalties of up to $1 million, and are subject to review only to the extent provided under 5 U.S.C. § 702 of the Administrative Procedures Act. Under 21 U.S.C. § 1905(c), defenses to enforcement actions include full and actual compliance with the Act, as well as any action or omission preformed in good faith.
A designated person may seek administrative reconsideration by OFAC of his designation under 31 C.F.R. § 501.807. However, the road is difficult. In Zevallos v. Obama, the Court of Appeals for the District of Columbia described the administrative process within OFAC as follows:
A request for reconsideration—also sometimes called a delisting request—may include arguments or evidence rebutting Treasury’s “basis . . . for the designation,” or “assert that the circumstances resulting in the designation no longer apply.” [31 C.F.R. at] § 501.807, 807(a). In other words, the designated person must argue that whatever rationale led Treasury to designate him under the appropriate statute—as relevant here, that the designated person was a significant foreign narcotics trafficker as defined in the Kingpin Act—was never true or is no longer true. The Office of Foreign Assets Control at the Department of the Treasury will “conduct a review of the request for reconsideration” and “provide a written decision to the blocked person.” Id. § 501.807(d). A designated person can request delisting as many times as he likes. See id. § 501.807.
Judicial review of a designation decision is similarly limited: it consists of a review under the Administrative Procedures Act of whether OFAC’s decision was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Needless to say, this standard is extremely deferential to OFAC. Challenges which in effect focus on the sufficiency of the facts underlying OFAC’s judgment, or the wisdom of OFAC’s assessment of those facts, will face particular obstacles.
If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch.