|Carlos Fradique-Mendez||Ana María Rodríguez|
Before the issuance of Regulation 304, regulations against money laundering and terrorism financing (ML/TF) were focused on some specific industries of the economy (such as the financial sector, football clubs, courier and mailing entities, gamble and games entities, gold exporting and importing entities, securities transportation, and custom agencies). Apart from the financial sector, other industries had not been heavily regulated, meaning that existing regulations were not comprehensive and neglected to address important matters. This resulted in the Colombian authorities being urged to update the standards and introduce new rules to act against ML/TF.
Regulation 304 of February 19 2014, acknowledges that Colombian authorities have concluded that the real sector is vulnerable to ML/TF. Through this regulation, targeted legal entities should initiate a more comprehensive study of the risk factors leading to ML/TF. In order to implement a system of self-management and prevention of ML/TF, entities in general must be able to: (i) identify the situations and scenarios that could lead to ML/TF according to their specific operations, businesses and activities (the entity should diagnose its ML/TF related risks and conduct a risk-mapping exercise); (ii) establish due diligence procedures (KYC – know your customer proceedings and background validation procedures regarding ML/TF and criminal records, to providers, contractors, clients and employees); and (iii) determine and implement policies for the prevention and management of ML/TF related risks.
Legal entities covered by Regulation 304 will be required to train their employees on the reports that must be filed before the Financial Intelligence Unit (Unidad de Información y Análisis Financiero) of any suspicious operation and activity. In addition, legal representatives and internal auditors will have specific follow-up and monitoring responsibilities regarding implementation of these policies and compliance with the applicable rules. Regulation 304 is oriented by the so-called tone-at-the-top philosophy, meaning that c-level employees must be committed to the implementation of self-management and ML/TF prevention systems. Communication efforts and training of employees, as post-implementation activities, will also be required. Compliance with these obligations must be observed before December 31 2014.
Through Regulation 304, Colombia has taken a step forward in adopting best practices and procedures in the fight against ML/TF. It is expected that, as companies become familiar with this regulation, the Superintendence of Companies could lessen the income threshold and, therefore, extend the scope of application for smaller companies.
Carlos Fradique and Ana María Rodríguez