Law of the Exchange Regime and its Unlawful Acts
Decree No. 1,403 was published in Official Gazette Extraordinary No. 6,150 dated November 18, 2014. Through said decree, the President of the Republic issued the Decree with the Status, Value, and Force of Law of the Exchange Regime and its Unlawful Acts (the “Decree”), the purpose of which is to regulate the terms and conditions in which the entities with competence over the regime of administration of foreign currency exercise the powers conferred on them, the fundamental parameters for the participation of private parties and public entities in the acquisition of foreign currency, and the events that constitute unlawful acts and violations in this matter and their respective penalties.
The Decree expressly includes the Ministry of the Popular Power with competence over finance matters among the administrative authorities of the foreign currency administration regime, which Ministry will act in coordination with the Vice-presidency of the Economic Area of the Revolutionary Cabinet Council in order to fix for the National Center of Foreign Trade (Centro Nacional de Comercio Exterior - “CENCOEX”) the priorities to be observed for the awarding of foreign currency, the incentive policy, and the control of the mechanisms administered by the competent authorities of the foreign currency administration regime.
Article 9 of the Decree ratifies under the title Alternative Exchange Market (Mercados Alternativos de Divisas) that the natural or legal persons that demand foreign currency may acquire the same through transactions in foreign currency offered by (1) Natural and legal persons of the private sector, (2) Petróleos de Venezuela S.A., and (3) the Venezuelan Central Bank (“VCB”).
However, said transactions will be made (i) as per the terms of the Exchange Agreements to that end executed between the VCB and the National Executive; (ii) according to the regulations that establish the terms, requirements, and conditions that govern the participation in said market, and (iii) according to the prudential rules issued by the superintendence with competence over banking and securities matters. Therefore, the implementation of alternative mechanisms for demand and supply of foreign currency, other than those currently available, require the issue and publication of a new Exchange Agreement.
The Decree maintains the obligation to declare the importation and exportation of foreign currency when the amount exceeds US$. 10,000.00, subject to the exemptions prescribed in the same. Likewise, the exportation of goods and services in excess of US$.10,000.00, must be declared to the VCB, informing the characteristics of each transaction.
In the Decree, in addition to the unlawful acts already existing, such as (i) acquisition of foreign currency through deceit; (ii) use of foreign currency for different purposes; (iii) unlawful acts committed through financial electronic means or with specialized knowledge, and (iv) commission of unlawful acts by service providers in public agencies or entities, the following were included as new exchange-related unlawful acts (a) presentation of balance sheets, financial statements and, in general, any false or forged document or attachment of any kind or type whatsoever in order to participate in or make transactions related to the exchange regime and (b) direct or indirect promotion or encouragement of the commission of foreign-exchange-related unlawful acts prescribed in the Decree.
In addition to the administrative violations already existing, such as (i) failure to announce the origin of the foreign currency and (ii) faults by the representatives of legal persons, the Decree includes the following administrative violations: (a) failure to refund; (b) obtainment of foreign currency by violating the rules and (c) failure to perform the obligation to provide information. The obtainment of foreign currency by violating the guiding rules of the procedures established by the competent authorities of the foreign currency administration regime was established as an administrative violation penalized with fine and refunding of the foreign currency to the VCB. However, according to the Decree, the criminal penalties for the failure to perform the obligation to refund are limited only to the cases when the amount to be refunded exceeds US$. 50,000.00, or its equivalent in another foreign currency, in addition to the imposition of fines. The lack of refund of sums smaller than or equal to US$. 50,000.00 is subject only to the imposition of administrative penalties and fines.
The persons adjudged to be liable for the commission of exchange-related unlawful acts and those penalized for any of the administrative violations prescribed in the Decree will be suspended from the Registry of Users of the Foreign Currency Administration System (Registro de Usuarios del Sistema de Administración de Divisas - “RUSAD”).
The Decree prescribes fines ranging from 200 to 5,000 Tax Units for the administrative violation corresponding to the failure to announce the origin of the foreign currency. The other administrative violations will be penalized with fines ranging from 0.1 to 0.5 Tax Units – as in effect on the date of payment – per each Dollar of the United States of America, or its equivalent in another foreign currency, of the amount of the relevant exchange transaction. However, in the case of faults by the representatives of legal persons, the legal persons will be subject to fines of double the equivalent in Bolivars of the amount of the exchange transaction.
The Decree establishes that the exchange-related unlawful acts will be penalized with imprisonment ranging from 1 to 7 years, as established in the Decree, including fines ranging from 0.1 to 0.5 Tax Units – as in effect on the date of payment – per each Dollar of the United States of America, or its equivalent in another foreign currency, of the amount corresponding to the relevant exchange transaction.
The period of time of the statute of limitations of administrative violations and their penalties is increased to 10 years. The limitations period will begin to elapse on the date of the violation. In the case of continued or permanent violations, it will begin to elapse on the day on which the continuation or permanency of the event ceased.
The Decree repeals the Decree with the Status, Value, and Force of Law of the Exchange Regime and its Unlawful Acts, published in Official Gazette Extraordinary No. 6,126 of February 19, 2014. All regulating provisions that contravene the provisions of the Decree are also repealed.
The Decree became effective on December 1, 2014.
In order to access the Decree, please click here.