JSCVL JSC VTB Bank (CE)

By Mengqi Sun 

The U.S. Treasury Department on Monday added Moscow-based Evrofinance Mosnarbank to its sanction list, alleging the bank has attempted to evade U.S. sanctions on Venezuela.

The bank, which is jointly owned by Russian and Venezuelan state entities, has assisted and provided support for Venezuela state-owned oil giant Petróleos de Venezuela SA, or PdVSA, which has been on the U.S. sanctions list since January, the Treasury said.

The latest action comes as the U.S. escalates the use of sanctions on the Nicolás Maduro regime, which the U.S. has accused of human-rights abuses. The U.S. has backed opposition leader Juan Guaidó over Mr. Maduro.

"The United States will take action against foreign financial institutions that sustain the illegitimate Maduro regime and contribute to the economic collapse and humanitarian crisis plaguing the people of Venezuela," Treasury Secretary Steven Mnuchin said in a statement.

Evrofinance didn't immediately respond to a request for comment.

The bank, on its Russian-language website, issued a statement regarding the U.S. sanctions, saying that it continues to operate in a stable manner and will unconditionally fulfill its obligations to clients and partners in full.

Evrofinance was founded as a binational bank to fund joint Russia-Venezuela oil and infrastructure projects, according to the Treasury. Russian banks Gazprombank and state-owned VTB Bank own stakes in Evrofinance. Venezuela's National Development Fund, also known as Fonden, owns just shy of 50% of Evrofinance, according to the Treasury. Gazprombank and VTB Bank were added to the U.S. sanctions list in July 2014.

Evrofinance acted as the primary financial institution to finance the Venezuelan oil-backed cryptocurrency, called the Petro, which was launched in 2018, the Treasury said. Early investors in Petro were invited to buy the cryptocurrency by wiring funds to a Venezuelan government account at Evrofinance, according to the department.

Evrofinance last May denied that it provides the clearing services for the cryptocurrency, saying such allegations are incorrect and that it doesn't provide such services for any cryptocurrencies, according to a statement on the bank's website.

Treasury officials say that Evrofinance's involvement in the cryptocurrency demonstrates that Petro was launched by the Maduro regime in the hope to skirt financial sanctions from the U.S. and other countries. The Trump administration last March prohibited Americans and U.S. companies from dealing in Petro.

Under the sanction, the Treasury Department's Office of Foreign Assets Control prohibits U.S. individuals or entities to have any dealings with Evrofinance. This includes all property and entities that are owned directly or indirectly, 50% or more, by Evrofinance in the U.S.

Monday's action against Evrofinance signals an increase in the pressure the Trump administration is placing on Mr. Maduro and the PdVSA, while also raising the level of risk for U.S. entities dealing with Russian financial institutions, says Michael Dobson, a former sanctions policy adviser at OFAC and now an attorney in national security practice at law firm Morrison & Foerster LLP.

"It's really a two for one for the administration," said Mr. Dobson.

The sanction order is the latest in a series of evolving U.S. actions related to Venezuela that have posed compliance risks for U.S. and international banks.

Write to Mengqi Sun at mengqi.sun@wsj.com

(END) Dow Jones Newswires

March 11, 2019 18:03 ET (22:03 GMT)

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