(Adds response from Treasury spokesman)
By Luc Cohen
CARACAS, Sept 17 (Reuters) - An industry group representing Florida banks pushed for an exemption to U.S. sanctions on Venezuela that were issued last week, executives said on Tuesday, arguing the measures had affected customers with no ties to President Nicolas Maduro.
The Trump administration on Aug. 5 tightened sanctions against Venezuela, freezing all government assets in the United States as part of its bid to oust Maduro.
Many Venezuelans have resettled in Florida and some who remain in Venezuela have accounts at Florida banks.
"When that came out it just created mass chaos here in South Florida," said David Schwartz, the president and chief executive officer of the Florida International Bankers Association (FIBA).
Financial institutions sought to limit their exposure to Venezuelan capital and restricted some customers' access to accounts, while awaiting guidance from the Treasury Department to avoid running afoul of sanctions.
In response, the group wrote the Treasury Department's Office of Foreign Assets Control (OFAC), which implements sanctions, asking for clarity on who was covered by the measure.
On Sept. 9, OFAC issued a license exempting former employees and contractors of Venezuela's government, as well as U.S. citizens and permanent residents - solving a big part of the problem, as it allowed banks to continue serving retired employees of Venezuela's government and state oil company PDVSA.
Daniel Gutierrez, the director of FIBA's anti-money laundering compliance committee, said it was the group's feedback on the Aug. 5 measure that prompted OFAC to issue the September license.
A Treasury spokesman said the department routinely engages with "relevant banking associations and industry stakeholders to ensure that the compliance community has the information they need to comply with OFAC sanctions programs."
The episode highlights how Washington's escalating series of sanctions, while unsuccessful so far in pressuring Maduro to leave office, have created unintended consequences by prompting banks and other institutions to halt activities that are not explicitly banned by the measures, known as "overcompliance."
Earlier this year, regulators stopped approving licenses for Puerto Rican offshore banks given their close ties to Venezuela, citing sanctions. The sanctions have even affected sports, with Major League Baseball banning players from playing in Venezuela's league due to its ties to the government.