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Money Laundering in Venezuela Parallel Market

The U.S. Drug Enforcement Agency was recently granted a court order to freeze the funds of Miami-based Rosemont Finance Corporation. Rosemont handled a large portion of business in Venezuela’s parallel market. The freeze order is the result of a money laundering indictment brought in Massachusetts against Rosemont’s principal, Rama Vyasulu. The indictment appears to have originated from an ongoing undercover investigation by the DEA.

According to several accounts, an estimated $900,000 in illegal drug proceeds have been tied to Rosemont’s Bank of America umbrella account which consists of more than 50 subordinate accounts that belong to foreign exchange brokers. More than sixty percent of those accounts operate in Venezuela’s parallel market. This scenario suggests that Rosemont was running the account as a money laundering and/or payable through arrangement.

The emergence of the Venezuelan parallel market is due in part largely to the enforcement of exchange controls imposed by President Hugo Chavez. Those exchange controls restrict the free trade of foreign currency in Venezuela.

The Venezuelan parallel market was devised to circumvent the exchange controls through loopholes in Venezuela’s exchange regulations. The parallel market allows traders the exchange of Venezuelan bolivars to U.S. dollars at a much higher exchange rate than currently allowed by the Venezuelan government. Since the freeze of Rosemont’s account the exchange rate of the U.S. dollar in the parallel market has skyrocketed 300%. The current rate is reported at 6.8 to one.

The next move the U.S. government will likely make is the seizure of Rosemont’s accounting records to determine the sources of the funds and the financial institutions responsible for the illicit transactions.