Venezuela legislates on illegal currency exchanges

Venezuela’s parliament passed legislation on Wednesday that provides for fines and jail time for Venezuelans and foreigners who violate the country’s laws controlling currency exchanges.

The regulations controlling the exchange of foreign currencies were introduced in 2003 and included the creation of a state currency board, banned foreign exchange transactions outside of the board, and set a fixed exchange rate.

The regulations, however, did not prescribe penalties for violations, and an active black market in currencies grew up outside of the official exchange system.

The new legislation changes that, prescribing fines depending on the amount of currency involved in particular violations and jail terms of from two to six years for violations exceeding $20,000 in value.

The jail terms were less than those originally proposed. There are exceptions in the law allowing trade in dollar-denominated government bonds and for arbitrage trade in local shares and American Depositary Receipts of companies that trade on both the Caracas and New York exchanges, which will bring higher than the official exchange rate.

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