News: Economy | Law and Justice
Venezuelan Authorities to Combat Foreign Currency Scam with Fingerprint Devices
Mérida, 7th October 2013 (Venezuelanalysis.com) Venezuelan authorities will install fingerprint devices in airports and other border posts to prevent foreign-bound Venezuelans committing a currency scam known as “the scrape”.
The scam involves taking advantage of the difference between the official exchange rate (BsF6.3 = $1) and the higher black market exchange rate between the Bolivar and foreign currencies.
Currency exchange controls have been in place in Venezuela since 2003 to prevent capital flight, and citizens are allocated annual amounts of dollars for specific activities such as travel and foreign study.
A citizen planning to travel is given their dollar allocation after buying a flight ticket, with a small portion of the dollars handed out inside Venezuela, and the majority of the currency loaded onto their credit card for purchases abroad.
A scam taking advantage of the situation is called “the scrape”, where citizens travel abroad and then use card transactions to receive most of their dollars in cash; “scraping” their card clean. Rather than spending the money abroad, they then return back to Venezuela and sell the dollars for up to seven times their official value.
As well as this, groups of people buy flights tickets to access their dollar allocation and then send their cards abroad with an acquaintance who returns with all of the cash for sale on the black market. Authorities have indicated that organised gangs are also involved in the scheme.
The practice appears to have taken off this year as the dollar’s back market price has ballooned, making the scam more lucrative. Along with other abuses of the currency system by “ghost” import companies, organised crime and corruption, such practices hurt the Venezuelan economy by undermining the national currency.
A further side effect of “the scrape” is that flights abroad from Venezuela are fully booked months in advance, and ticket prices have tripled in some cases. However many of the planes leave with empty seats belonging to people who only buy the flight ticket to access foreign currency and take part in “the scrape”.
Authorities and airline representatives have met in recent weeks to design strategies to crack down on “the scrape”.
One of the main measures announced is the installation of fingerprint machines in airports and other border posts to prevent no show passengers from accessing their dollars. Foreign currency allocations will only be activated on a traveller’s credit card once they are about to fly.
“The game is up for these people. We’ve been meeting with [a range of Venezuelan authorities]. We’re transferring them the information of which passengers are actually leaving the country,” said Luis Semprún Van Greiken, president of the Association of Venezuelan Airlines (ALAV) last week.
The finger print machines will be installed by the Identification and Migration Administration Service (Saime) and the government’s foreign exchange commission Cadivi.
“The idea is that everyone passing through this filter has the same treatment,” said the Saime director general, Juan Carlos Dugarte in a press release.
Further, the attorney general’s office is to dispatch a team of investigators to crack down on abuses of the currency control system.
A reform to the Law Against Illicit Currency Exchange is also being studied, which would increase penalties for those engaging in “the scrape”.
Local consumer group Anauco has opposed the fingerprint scheme, arguing that it will cause longer queues in airports and that authorities could use other means to monitor which passengers with foreign currency allocations actually take their flight.
The rising gap between the official and black-market dollar rates accompanies other economic difficulties for Venezuela this year, including an annualised inflation rate of 45% and scarcity in some basic products such as toilet paper.
The conservative opposition blames these problems on government mismanagement and policies such as price and currency controls.
However, President Nicolas Maduro has argued that the situation is being caused by an “economic war” waged by national and international economic actors close to the opposition.
The Venezuelan Central Bank, government ministers and currency authorities are currently studying reforms to the country’s currency controls, which are expected to be announced in the near future.
Published on Oct 7th 2013 at 4.33pm
- 1 of 783
- 1 of 587
- 1 of 30
- 1 of 24