The Bandagro Bond history, some of which is obviously very disturbing, is as follows:

• Bandagro, or more properly, Banco Desarollo Agropecuario SA, was a defunct Venezuelan agricultural financing institution, with close ties to,(and believed to be ultimately controlled by) the Venezuelan government, that went into liquidation years 25 ago, after its charter was revoked by governmental regulators. Payment was to be made through the sovereign guarantee.
  

• US$1bn of zero coupon Bandagro bonds, which should conservatively be worth around $6bn now, are allegedly in circulation, and in the hands of investors, who believe them to be valid and enforceable.
  

• Certain investors requested that Venezuela's Attorney General make a ruling that the bonds were authentic, and allegedly relied upon the resulting opinion when they purchase a large number of the bonds.
  

• Subsequently, the Venezuelan government declined to honor the bonds, and litigation by unhappy investors has been pending ever since in the United States.
  

• The government of Venezuela later declared that the Attorney General had reversed herself, and ruled the bonds bogus. The litigants have taken the position that the original ruling of the Attorney General should bind its government.
  

• To add fuel to the fire, apparently there are sworn affidavits from former Banagro officers to the effect that their purported signatures on the bonds are forgeries.
  

• There have been a number of posted investor warnings over the years, from US and other countries' regulators, declaring that the bonds' authenticity is in dispute, that some examples may actually be recently produced forgeries, and that fraud is most likely involved.

Compliance officers at broker-dealers and financial institutions are strongly cautioned to counsel their firms yo avoid these bonds at all costs, since even if the bonds are authentic, they will not be honored for payment by the government of Venezuela when presented for redemption.

This is just one more headache for American bankers dealing with Venezuelan-originated financial transactions, now globally suspect and high-risk by definition, since the US OFAC sanctions on Iran were issued. How can one deal confidentially with any Venezuelan bank, and not worry about indirect Iranian transactions.

Canadian banks have their own particular Venezuelan nightmare, due to the exposure of the Venezuelan-Italian Mafia drug connection, following upon the mass arrests in Italy & Canada of reputed Organised Crime figures. Some of the major individuals named in the Antonini/del Nogal Argentinian money laundering scandal are wanted in Canada for narcotics trafficking, or suspected of using Canada for transit of drugs and for money laundering operations. They were working with the organisation whose members are now in custody.

European bankers are also caught in a difficult situation, as they fear the consequences of large transactions with Venezuelan banks that turn out to be covert Iranian payments. Worse, there are reports that certain intelligence services and law enforcement agencies have warned major European banks to watch for illicit Venezuelan funds.

If you cannot absolutely guarantee that large new deposits coming into your bank from Venezuelan clients are from legitimate, private sources, prudence dictates that you firmly decline the business.