Illicit Currency Exchange Law

Repealing of the Illicit Currency Exchange Law. Comments to the Official Gazette

Finally, the relaxation of the Illicit Currency Exchange Law was consummated, and to the surprise of many, it had already been carried out without much publicity within the latest reforms of that Criminal Law.

We must highlight the reform of December 30th, 2015, which eliminated the sale of foreign currencies or dollars as a crime and focused on the participation of individuals and public entities in the acquisition of preferential foreign exchange that is assigned by the Foreign Trade Center (CENCOEX).

As a matter of fact, we have to make it clear that since 2015, within theIllicit Currency Exchange Law, there is no regulation that establishes the purchase and sale of dollars as a foreign exchange crime.

Having made this clarification, we consider that this new decree approved by National Constituent Assembly relaxating the Illicit Currency Exchange Law aims to clarify that in Venezuela exists “the most comprehensive guarantees for accomplishment (…) in the model of productive socio-economic development of the country” as established in article 1 of the decree.

The center of the Decree is found in the controversial articles 2 and 3, one called Favorability and the other minor damage of the crime, respectively, which provide the following:

No Favorability

Article 3. In virtue of the harmful nature of public property of economic crimes established in articles 21 and 23 of the Decree with the Rank, Value and Force of the Law of Foreign Exchange Regime and its Illicit, and in order to avoid its impunity, the exception of retroactivity of the most favorable law will not be applied to serious cases that occurred up to the date of the publication of this Constitutional Decree in the Official Gazette of the Bolivarian Republic of Venezuela.

Minor Damage of the Crime

Article 4. The sanctions established in articles 21 and 23 of the Decree with Rank, Value, and Force of the Law of Foreign Exchange Regime and its Illicit, shall be reduced to its two thirds, when all the operations carried out by the same active subject, do not exceed a total of TEN THOUSAND DOLLARS of the United States of America (US $ 10,000.00) or its equivalent in another currency. Without detriment to the actions of the State to compensate the public patrimonial damage.

According to article 3 “the exception of retroactivity of the most favorable law will not be applied”, this means that despite the fact that the repeal of the law favors the people who are being prosecuted or were convicted of Criminal Foreign Exchanges committed before Thursday, August 2, 2018, they will continue to impose or continue to serve prison sentences (reduced as we will see further), on this subject Venezuela’s Supreme Court of Justice, has established that:

… in criminal proceedings that are ongoing (that have not passed in the authority of res judicata), retroactivity is due to the existence of a succession of criminal laws (either substantive or adjective) more favorable to the active subject of the punishable act that occurred under the rule of the repealed law, so that, based on the principle of favorability of the accused, the criminal law can be applied retroactively or with retroactive effect by the administrators of justice, if appropriate. Exp. C13-100. Sentence: 028. 9/02/2014

Thus, in Venezuela, penalties will continue to be applied under the Foreign Exchange Law, despite having been repealed, to sanction the following conducts:

Acquisition of Foreign Currency through Deception

Article 21. (Law of Foreign Exchange Regime and its Illicit Official Gazette N ° 6.210 (E) of December 30, 2015)

Those who acquire foreign currency through the mechanisms administered by the competent authorities of the foreign currency administration regime, by means of deception, alleging false cause or using any other fraudulent means, will be punished with imprisonment of four (4) to eight (8) years and fine equivalent to twelve (12) Tax Units (12 UT) in force on the date of the conviction, for each dollar of the United States of America or its equivalent in another currency, of the amount corresponding to the respective exchange operation, in addition to the sale or reimbursement of the currency to the Central Bank of Venezuela. If the deceit, the false cause or the fraudulent means that is used are discovered before the liquidation of the currencies, the prison sentence will be reduced according to the provisions of the Penal Code.

Deviation from the Use of Currencies

Article 23. (Law of the Exchange Regime and its Illicit Official Gazette N ° 6.210 (E) of December 30, 2015)

The authorizations for the acquisition and liquidation of currencies issued by the foreign exchange authority are non-transferable and must be used only for the purposes and terms that were generated in accordance with the request for the acquisition of the respective currencies. Whomsoever allocate the obtained currencies, through the mechanisms administered by the competent authorities of the foreign currency administration regime, for purposes other than those that gave rise to their request, or those declared therein, shall be punished by imprisonment of three (3) to seven (7) years and a fine equivalent to ten (10) Tax Units (10 TU) in force on the date of the conviction, for each dollar of the United States of America or its equivalent in another currency, of the amount corresponding to the foreign currency obtained. Likewise, any deviation or use is considered unlawful use of foreign currency by natural and legal entity other than authorized, those who incur in said crime will be sanctioned in accordance with the provisions of this article.

That said, in article 4 of the derogatory decree of Illicit Currency Exchange Law, it is established that the sanctions for the illicit exchange rate of acquisition and deviation of the use of foreign currency before said “will be reduced to its two thirds”, when the total of the operations carried out by the same active subject does not exceed out by US $10,000.00 or its equivalent in another currency, that is to say, the prison sentenced that we saw before will only be reduced to its two thirds”, perhaps they wanted to say it “will be reduced by two thirds” which would have made a little more sense because the penalty would have been shorter. But writing it down in that way turns out that the reduction will only be one third.

Finally, the derogatory decree of the Illicit Currency Exchange Law establishes the special procedure in the Organic Code of Criminal Procedure and not in the Criminal Code as mentioned in the decree, referring to the claim for damages derived from the Illicit Currency Exchange which should be promoted by the office of the General Procuracy of the Republic of Venezuela.