Nicaragua: New anti-money laundry regulations
Ever since the Republic of Nicaragua became a member of the Financial Action Task Force of Latin America (GAFILAT), Nicaragua has experienced a gradual, yet impactful, overhaul in its provisions regarding prevention, detection and criminalisation of activities involving money laundering and financing of terrorism.
After GAFILAT published the Mutual Evaluation Report for the Republic of Nicaragua in October 2017, a series of key legal reforms were introduced to correct the detected deficiencies. As a matter of fact, two new laws were enacted in Nicaragua to address these issues: the Financial Analysis Unit Law and the Law Against Asset Laundering, Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction.
These new laws impose obligations on a series of entities to prevent, detect and report any suspicious activities to the financial analysis unit by conducting a series of compliance procedures.
Although many of these obligations were already in force before the promulgation of these new laws, broad powers were given to the financial analysis unit to require more information from public and private entities. Moreover, entities required to have compliance procedures in place now must report certain types of transactions, regardless of whether they are considered suspicious.
The international financial industry has been particularly affected by these new laws. The free movement of capital, which has been unrestricted since the early 1990s, remains unrestricted; however, these movements are now more closely monitored by the financial analysis unit. For example, local financial institutions must now request and submit more of the originator`s personal information from foreign correspondent banks and from foreign remittance originators regarding when these transfers or remittances of money into Nicaragua exceed a certain amount.
Some of these foreign correspondent banks and remittance originators have been reluctant to share their clients' information due to the privacy laws that apply to them and this has placed local entities in a conundrum when it comes to retaining their foreign partners and also complying with the regulations imposed by the financial analysis unit.
The financial analysis unit will need to be informed about the different legal regimes that may affect the information responsibilities mentioned above with respect to foreign privacy laws. Such authority will need to maintain supervision over the Nicaraguan financial system and at the same time will also need to review its criteria, and probably accommodate some of its regulations in order to reach a balance between these diverse legal frameworks.