Digital system pays Venezuelan health personnel from frozen funds

When Covid-19 spread in Venezuela last year, politicians who opposed the authoritarian government of Nicolás Maduro wanted to help the healthcare staff who fought against pandemic, often without protective equipment or disinfectant.

You could do little. Maduro had reinforced his grip around the country's wallet; Hard US sanctions had tightened a terrible economic crisis; And neither the government nor the intimidated opposition could do without money for doctors and nurses.

But the president's opponents had a potential weapon: access to Venezuelan state funds that are frozen on US bank accounts.

Since the Venezuelan Congressman Juan Guaidó started his bold attempt to stop taking Maduro in 2019, the US government has recognized him as a legitimate president of Venezuela. Washington therefore argues that the Venezuelan state money of the Guaidós government confiscated by the US authorities belongs-not the de-facto government of Maduro.

Guaidó's people thought if they could persuade the US Ministry of Finance to release the money, they could pay a bonus to the healthcare staff. They asked the US law firm Sullivan & Cromwell for help.

Sergio Galvis, Head of Latin America Practice, led a team of 14, which consisted of experts in "a variety of disciplines-banking, cyber security, sanctions, payment systems and currency controls," he says.

The first task of Sullivan & Cromwell was to convince the Office of Foreign Assets Control (OFAC) of the Ministry of Finance to release the funds. "For OFAC and the US government, it was very, very important that the money really arrives at the recipients provided," says Galvis.

The next hurdle was to find a way to send the money safely to Venezuela without being intercepted by the Maduro regime or the many creditors who complain about compensation for broken promises and expropriated assets over the past 22 years of revolutionary socialist rule.

That meant that sending money via the Venezuelan banking system was not an option. So Sullivan & Cromwell teamed up with technology companies, including the digital currency company Circle, to lead the money to Venezuela in other ways.

"We were able to set up a pipeline for the payment of aids that used the power of USDC-dollar-based, open, internet-based payments in digital currency-to handle the controls imposed by Maduro via the domestic financial system," says Circle on his website.

The money was deposited in digital wallets created by the online payment platform AIRTM. Doctors and nurses had to register on the Airtm website to receive payment.

This led to some problems. Guaidó's team says the Maduro regime blocked AirtM and forced the recipients to use VPNS (virtual private networks) to access payments. The Canadian VPN company Tunnelbear made free access to its services for a while. arguing "Employees deserve the advantages of an open and uncensored one Internet ”.

As soon as the recipients had the money in their digital wallets, they were able to spend it online, transfer to local bank accounts in the Venezuelan currency Bolívar or send them to other AirtM users.

All in all, Guaidó's team said that the program had $ 18 million in more than 60,000 doctors and nurses. Payments were set at $ 300 per person in three monthly installments of $ 100. In a country in which the official minimum wage is less than $ 3 per month, it was estimated at a time when the healthcare staff, including doctors and nurses, had to do with little.

Did the system work? In general, yes, says Mauro Zambrano, a union representative of the Venezuelan health personnel. "There were some problems and some workers only received two of their three payments, but many people got the money and it made a difference," he says.

There were some problems. . . But a lot of people got the money and it made a difference

Guaidó, OFAC and Sullivan & Cromwell may keep money transfers for a noble company, but they were theft for Maduro. In his view, the United States had stolen Venezuelan state money and handed over to a puppet government led by the Guaidó not elected, which in turn paid it to selected health personnel without adequate supervision.

However, the legal dispute is waterproof for galvis. He says that the client of his company was "a government recognized by the United States that acted in accordance with US law, which is quite clear in this regard". As soon as the US Foreign Minister "X" has referred to as a recognized government of a country, this is binding for all weapons of the US government, ”he adds.

galvis explains the essence of what Sullivan & Cromwell wanted to achieve: "We had to develop a system that corresponded to the US sanction regulations and lawfully deposited money into the electronic wallet of a nurse sitting in Caracas so that she could go to the doctor."

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