Venezuela to probe possible corruption linked to offshore bank holdings

CARACAS, VENEZUELA – Venezuela is launching a probe into large offshore bank deposits amid a spate of reports that at least $2 billion was siphoned off by corrupt, top-level officials at state-run oil company PDVSA.

Chief prosecutor Luisa Ortega Diaz’s announcement Tuesday was the socialist government’s first response to the determination this month by the Obama administration that a bank in the European principality of Andorra was used to launder money on behalf of groups in China, Russia and Venezuela.

The investigation by the U.S. Treasury Department found that Banca Privada d’Andorra charged exorbitant commissions to create shell companies and complex financial products on behalf of PDVSA. In total $4.2 billion of Venezuelan funds, some of it handled by the U.S. banking system, were processed by the bank.

The designation led the bank’s Spanish unit, Banco de Madrid SA, to file for bankruptcy and in recent days Spanish and Venezuelan media have been chock full of sometimes sensational reports about former high-ranking Venezuelan officials using the bank and its affiliates to stash millions of dollars in kickbacks from energy and public works contracts.

Ortega Diaz didn’t say who was being probed but dismissed speculation she had been forced to take action by calls from the opposition.

The pro-government National Assembly opened a separate probe on Tuesday, with lawmakers warning that the opposition’s outrage over the alleged corruption is part of a strategy to destabilize President Nicolas Maduro’s rule.

Indeed, while Venezuela is a major transit zone for South American cocaine and has long ranked low on global surveys for perceptions of corruption, government supporters say the timing of the accusations, as tensions ratchet up with the United States, suggests they may be politically motivated.

This year, a report by the International Consortium of Investigative Journalists found that Venezuelans were among the top Swiss clients of HSBC, holding more than $14.8 billion in secret accounts between 1998 and 2007, more than any other country except Switzerland and the UK.