El Salvador: Anti-money laundering law

Author: | Published: 20 Oct 2016
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Consortium Legal – El Salvador

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Edificio Avante Local 313
Urb. Madre Selva III
Calle Llama del Bosque Poniente
Antiguo Cuscatlán, La Libertad
El Salvador

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+503 2209-1600

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Violeta Molina

Last year, the Salvadoran Congress passed an amendment to the existing anti-money laundering (AML) law, which has been in force since 1998. The purpose of the amendment was to include under the definition of regulated entities several entities that were not originally covered, and that therefore did not have to comply with the AML law. These entities include: general business corporations; accountants; lawyers; public notaries and any entity that has been lawfully incorporated; as well as financial institutions. The amendments establish new obligations, processes, requirements and sanctions that apply to all regulated entities.

This measure was intended to bring El Salvador into step with the strict anti-money laundering regimes implemented in the US and other Latin American countries. The intention was to create the control mechanisms that have been recommended by the Caribbean Financial Action Task Force Group (CFATF in Spanish).

This amendment has created a huge impact and a lot of concern for the new so-called regulated entities, particularly concerning the short time-frame imposed to meet all the new requirements. The private sector reacted by saying that the AML law should only apply to a specific economic sector (financial institutions). It also said the time-frame should be extended, since the new obligations cannot be easily complied with. The new obligations include: appointing a compliance officer in each company; creating a compliance manual; and registering with the new financial investigation unit of the Attorney General's Office. The level of reporting has also increased significantly.

This is an opportunity for El Salvador to demonstrate its greater legal security and stability, with regulations that emulate the best practices of more sophisticated legal systems. It is hoped that this will attract more foreign investment. It is also an opportunity to create better value for the company, under the assumption that everyone can contribute to having a compliance policy.

The framework of the new AML law involves several changes regarding the supervision of operations and transactions in El Salvador, with the intention of establishing control mechanisms. Finally, it should be noted that the banking and financial sector has to be more aware of its compliance procedures. Other new regulated entities are still working on the improvement of their compliance policy.

Violeta Molina