Moving money north: currency exchange in Venezuela via the Permuta

These anxieties lead many Latin Americans to seek to protect their wealth by transferring it to the perceived more stable banking systems in Europe and the United States. In turn, to combat capital flight, some Latin American governments restrict the outflow of funds by imposing currency exchange restrictions. Venezuela is an example.

Juan L. Santos, CAMS, Miami, FL, USA, juanlsantos@gmail.com Brian J. Stoeckert, CAMS, CFE, president, Stoeckert Consulting Inc., Los Angeles, CA, USA, brian@stoeckertconsulting.com This article (but not the diagram) was first published in the Jan/Feb Vol. 8 No. 1 edition of ACAMS Today, a publication of the Association of Certified Anti-Money Laundering Specialists (ACAMS) © 2009 -www.acams.org.

Currency exchange in Venezuela

Venezuela maintains a complex currency exchange system. Recent socialist policies enacted by the Venezuelan government, including the nationalisation of the electricity industry and the largest telecommunications company, inflation that reached an 11-year high at 30.9% in 2008 and the general feeling of political and economic insecurity, have prompted increased conversion of the local currency, the Bolivares Fuertes ( Bs.F), into the stronger Euro and US$. Venezuela lacks a free market for currency exchange and changing on the black market is a felony. Under Venezuelan law only three legal ways exist to exchange currency: bonds denominated in US$ purchased with Bs.F, the CADIVI system, and the permuta.