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Regulating offshore banking in Guatemala

The latest regulation approved by the Monetary Board of Guatemala is contained in its resolution JM-43-2013. It provides for new rules in order to perform activities in Guatemala by banking or financial offshore entities, in the process eliminating the previous rules provided for in resolution JM-285-2002. The new regulation was prepared by the Superintendency of Banks, and proposed to the highest ranking authority in the financial system of the country. It became effective on April 19 2013, as a consequence of some important amendments introduced last year to the Law for Banks and Financial Groups – Decree 19-2002 of Congress – (known here simply as the Act), adding higher prudential standards in regard to the collection of monies and the opening and maintenance of deposit accounts in such institutions.

According to the Act, in particular its article 27, a financial group can be integrated among institutions with financial purposes such as investment banking, exchange of currencies, warehouse activities, insurance and bonding, credit card issuance, factoring, leasing, stock exchanging and offshore banking. The main responsible entity will be either a holding company and if no controlling entity exist, then always a bank that is at the heart of the group, must be the responsible entity for the entire group. It could be said, therefore, that an offshore Bank can not stand alone in Guatemala. It must pertain to a financial group that is fully subject to the control, supervision, regulation and potential sanction of the banking authorities in Guatemala.

There is no official list of countries that will be regarded as acceptable, or not, as the place of location of the offshore entity. However, in order to get approval the entity must demonstrate that it has obtained authorisation from the banking authorities of the place of creation to perform financial activities outside that country; it must also provide evidence of its licence. Moreover, it has to demonstrate that it is not only authorised to conduct such business but also that it is actually supervised in such activities. Interestingly, the promoters of the creation of the offshore entity must demonstrate that the regulator in the country of origin has authorised the actual interchange of communications and information with the Superintendency of Banks of Guatemala. An affidavit must be produced, making a declaration that the entity will fully comply with the prudential standards of the country of origin, and, in the event they are not as stringent as those applicable in Guatemala, especially those related to minimum patrimony and liquidity, then it will be bound by the pertinent local rules.

There are also regulations for the honorability and recognition of its shareholders and directors included in the new regulation. This makes the process for approval almost identical to the one applicable to the authorisation of local banks or branches of foreign banks. In a nutshell, even though there is not an official black list of offshore jurisdictions, Guatemala has moved to a more protective position in favour of local bank account holders. Definitely a good move.

Alvaro R Castellanos Howell

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