Financial System at Risk Due to Change in Laws

After the Nicaraguan Assembly approved a bill that forces local banks to allow public officials sanctioned by OFAC to have an account, there are fears that the country will be isolated from the international financial system.

Thursday, February 11, 2021

A statement issued by the National Assembly on February 3 explains that the deputies approved the Law Initiative of Reform and Addition to the Law for the Protection of the Rights of Consumers and Users, a legislative project which guarantees a better and greater protection of the rights of consumers and users in the access to goods and services as a human right recognized by the Nicaraguan State.

According to the official statement "... this reform will correct the unequal relationship between the provider of financial services and the user of such services. In this sense, Deputy Gutiérrez pointed out that this law requires financial institutions to notify the users of these services in a reliable manner about a decision to deny or cancel a financial service, and to justify or argue the reasons for such decision."

You may be interested in "Financial Services: Business Potential in Central America"

After learning of the changes, the Nicaraguan business sector warned about the risks involved with the modifications approved by the National Assembly.

In a press conference held hours after the deputies' vote, Michael Healy, president of the Superior Council of Private Enterprise (Cosep), said that they analyzed "... the approval of this reform in the Board of Directors and they see it with great concern and we also support the communication published by Asobanp which has a very critical position due to the fact that this law is putting the financial system in the worst situation ever in the last 30 years."

According to opposition deputies and business groups, the changes to the legislation will allow sanctioned officials to open bank accounts and affect the national financial system.

For Healy, this unilateral decision of the government to try to force banks to take measures that are prohibited by international financial entities puts the national financial system at risk of disappearing, since it would lead, among other negative effects, to the closing of correspondent bank accounts.

The sending of remittances to Nicaragua would be another of the things that could be affected, if banks are forced to reactivate or open accounts of sanctioned officials.

Mario Arana Sevilla, former president of the Central Bank of Nicaragua, told Laprensa.com.ni that ".... in an extreme case that the relationship between the local financial system and the corresponding banks is affected, alternative mechanisms for sending remittances will have to be sought, but they will be more expensive, they will not be through the financial system".

An article in Laprensa.com.ni published on February 11, explains that not only banks are required to reestablish financial relations with those sanctioned and all those affected by the Office of Foreign Assets Control (OFAC), as these persons could contract services with insurance companies, participate in the operations of the Stock Exchange and contract the services of a bonded warehouse.

See Laprensa.com.ni articles "What would the total loss of remittances by Ortega's imposition on banks mean for Nicaragua?" and "Not only banks are forced to resume operations with those sanctioned. These are other financial entities forced".

¿Busca soluciones de inteligencia comercial para su empresa?



More on this topic

Panama: Penalization for Illegal Remittances

November 2019

Sanctioning anyone who transfers money through systems not authorized by the competent authority with an 8 to 15-year prison term is part of the bill that will be presented to the Assembly.

On November 12, the Cabinet Council approved the bill adding article 253-A to the Criminal Code, which will be presented to the National Assembly for discussion and subsequent approval.

Fewer Controls on Money Laundering

December 2017

Salvadoran bankers warn that the reform of the Bank Law proposed by the government would reduce controls on money laundering, since banks would only be able to close accounts with a previously aquired official resolution.

The president of the Salvadoran Banking Association (Abansa), Raul Cardenal, stressed that "...

Honduras: Supervision of Non-Financial Corporations

April 2017

In May, approval could be given to the regulation of the law that obliges real estate agents, pawn shops and lawyers, among others, to report suspicious operations of more than $10,000.

The socialization process of the regulation of the Law for the regulation of designated non-financial professional activities (APNFD) has already ended, and Congress estimates that next month it could be approved.

Costa Rica: Implications of the Money Laundering Law Reform

April 2017

The amendment to the money laundering law approved in the first debate requires accountants, lawyers and real estate agents to report suspicious transactions made by their clients.

Bill 19.951 reforming the Law on Narcotic Drugs, Psychotropic Substances, Drugs of Unauthorized Use, Related Activities, Legalization of Capital and Financing of Terrorism was approved in a first debate by the Legislature on April 21. The new regulation establishes the obligations on professionals engaged in non-financial activities, such as lawyers, accountants, notaries and real estate agents, once the law is fully approved and enacted.

ok