Human Dignity Abused: The Global Financial System and the Case of Venezuela

A dominant idea in international human rights practice is that states must respect human dignity. In the case of Venezuela, human dignity has been systematically and repeatedly violated. First, as the Report of the Independent International Fact-Finding Mission on the Bolivarian Republic of Venezuela showed, the state has developed policies to limit people’s freedom unjustifiably. Secondly, the socio-economic situation is so precarious that 94,5 % of the population lives in poverty. This second point is of considerable importance because it does not only involve the Venezuelan state, but also a global financial system that has often been used to affect the weakest and poorest people. As alleged by independent investigations conducted by the Organized Crime and Corruption Reporting Project (OCCRP) and Farah and Yates, some Swiss banks have been involved in this process of unprecedented impoverishment in Venezuela. This case makes evident, once again, that a radical change of the global financial system is required so that it no longer supports violations of human dignity. I unpack this argument further in the remainder of this essay.

The Venezuelan state’s primary source of wealth is oil, and the money from its sale was the main factor driving the country’s development during the 20th century. The 21st century, however, is a different story. During Hugo Chávez’ government, oil reached a price of more than US$100 a barrel, which logically would have helped solve many of the social problems that brought Chávez to power. However, this did not happen, as the existing corruption grew even stronger. Much of this money did not stay in Venezuela but has found its way into the global financial system. The most damaged institution was Petróleos de Venezuela (PDVSA), the state oil company. On 20 February 2022, the OCCRP reported that it is not known exactly how much money was looted, but it was no less than US$11 billion between 2002-2014; it is even claimed that it could have been as much as US$300 billion.

Farah and Yates state that the five main activities used to defalcate PDVSA were fictitious oil sales and loans, physical asset purchases, fictitious state infrastructure projects, illegal gold mining, and bank transfers. Banking transactions were always the preferred, though, as banks offer a solid institutional backing vis-à-vis society, especially if they are institutions of international prestige. Most banking transactions followed this route: Venezuela, the United States (Panama or the Cayman Islands), and Switzerland. The money then returned to the United States to be invested in real estate, which makes it more difficult to trace the money.

The involvement of Swiss banks in this corruption and money laundering scheme has been relevant. The OCCRP explained  how Credit Suisse helped famous Venezuelan politicians and businessmen to hide their money in Switzerland, using the façade of banking secrecy. According to the investigation, more than 20 Venezuelans associated with corruption in PDVSA hid at least US$273 million in secret Credit Suisse accounts. The accounts were opened during 2004-2015 when the most significant corruption schemes took place. Credit Suisse did not act innocently, as the bank either had direct information about the criminal profile of these clients — as it happened with Nervis Villalobos — or simply looked the other way and was not diligent in seeking financial information — as in the case of Omar Farias. As reported by the Zurich police, 1 in 8 Swiss banks is involved in this scandal and, according to Swiss prosecutors, suspicious bank movements of around CHF 9 billion have been detected, which leads to believe that the total sum is probably higher.

To a large extent, this scandalous situation was due to the existence of banking secrecy in Switzerland, legally established in 1934. And although Switzerland has concluded treaties with the European Union, the United States, and other countries to provide information on account holders, the truth is that this has had a minimal practical effect in combating money laundering. First, Switzerland gives the information to the European Union and other countries to which it has committed itself by agreement, but most of the countries from which much of the money laundered takes place are not part of this group and consequently do not receive any information. Switzerland is not obliged to provide information to the Venezuelan state on accounts held by Venezuelan citizens in Swiss banks. Second, the Swiss Financial Market Supervisory Authority warns banks about the risk posed by some clients, but the final decision rests with the banks, which in many cases assume the risk. Attempts have been made to change the Swiss banking model, but they have failed. Many Swiss banks are now implementing trusts, making it easier to hide the identity of money launderers.

Of course, corrupt Venezuelan politicians and their criminal partners have used the global financial system machine elsewhere in the world. Banco Corporativo (Nicaragua), Banco Espírito Santo (Portugal), and the move of PDVSA’s European headquarters from Lisbon to Moscow are just three more examples of a long list. The core point here is that these illicit activities — carried out with the complicity or acquiescence of financial institutions — have terribly harmed the Venezuelan population. Much of the stolen money was destined for social programmes in favour of the weakest. In accordance with the World Bank, in 2019, 27.4 % of the population suffered from malnutrition. The ENCOVI survey (Encuesta Sobre Condiciones de Vida en Venezuela) from 2021 revealed some other shocking data:

  • 76.6 % of the population is in extreme poverty;
  • only 40 % has formal employment;
  • public employees have an average salary of US$12.3 a month;
  • between 2015-2021, more than 5 million Venezuelans have left the country for economic and social reasons;
  • Venezuela became the most unequal country in the Americas (0.561 Gini);  and
  • 75.2 % of the inhabitants did not receive any social assistance from the state.

It is nothing new to call for reform of the global financial system, and indeed some steps have been taken to try to improve the situation. But there is still a long way to go. The current case of Venezuela clearly shows how damaging the global financial system can be if there are no clear and strong rules. It is not only about how much money the Venezuelan state has lost. It is mainly about all the social and political misery that has arisen and in which the global financial system has had a significant share of responsibility. The financial system is necessary, but under no circumstances should we accept that it becomes an instrument that threatens and even abuses human dignity, as is currently occurring in Venezuela and other countries.

Johnny Antonio Dávila is a Venezuelan Lawyer and Fellow of the Global Justice Program at Yale University. He holds a Ph.D. in Philosophy from the University of Göttingen (Germany). His research interests lie in theory of human rights, political philosophy — including issues of global justice —, and philosophy of law.

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