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.
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.
The European Commission announced that the two Central American countries are on the list of nations with deficiencies in their anti-money laundering and anti-terrorist financing strategies.
Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar/Burma, Nicaragua, Panama and Zimbabwe are the countries included in the list, the European Commission reported.
From May 2019, foreign customers will have to declare to local system banks that their funds meet their country's tax requirements.
The Superintendence of Banks of Panama (SBP) approved Agreement 02-2019, which implements the recommendations of the Financial Action Task Force, which consists of expanding the required due diligence measures of banks with their customers.
The bill against money laundering which is making progress in the National Assembly, includes prohibiting corporations from issuing bearer shares.
The Justice and Legal Affairs Committee of the National Assembly approved the ruling of the new Law against Money Laundering, Financing of Terrorism and Financing the Proliferation of Weapons of Mass Destruction.
Among the activities susceptible to laundering are sales of gold and vehicles, the purchase and sale of real estate and electronic money transfers.
From a report entitled "Mutual Evaluation of Nicaragua October 2017", by the Financial Action Group of Latin America (Gafilat):
Key findings
Nicaragua has legal and regulatory provisions, as well as an institutional framework allowing combating, at a certain level, Money Laundering (ML) and Terrorist Financing (TF). The current legal framework in force has some deficiencies that limit the general system effectiveness.
Panama and Nicaragua are among the ten countries in Latin America with the highest risk of money laundering, according to the Basel Institute of Governance.
The anti-money laundering index (AML) prepared by the Basel Institute of Governance places Panama in fourth place in the list of countries with the highest risk of money laundering and financing of terrorist activities in Latin America and the Caribbean.
...and I will tell you who you are. In their quest to reduce exposure to risk, banking correspondents have started to restrict the services they provide to gambling companies, remittance companies, and brokerage firms that are not related to banking groups in the region.
In order to reduce risk exposure, some international banks with correspondents in Panama and other countries in the region are failing to open accounts for or provide services for companies whose income comes from activities such as remittances and gambling.The banks' argument is that they are more likely to be used for money laundering. Even non-banking brokerage firms claim to have difficulty offering their customers products and services,"... since banks wont open accounts in which customers can deposit their funds and receive a return on their investment."
After the bank was taken over because of its inclusion in the Clinton List drawn up by the U.S. Treasury Department, the Superintendency of Banks has ordered its reorganization and sale to another bank.
From a statement issued by the Superintendency of Banks in Panama:
Through Resolution SBP-0116-2016 of July 1, 2016, the Superintendency of Banks has ordered the reorganization of Balboa Bank & Trust Corp., effective from the date July 4, 2016 at 2:30 pm, taking into consideration the recommendations of the Interim Administrator.The reorganization of the bank aims to fulfill three basic objectives:• To protect the best interests of depositors;• To minimize any loss of value of the bank to the detriment of depositors and•Reduce any adverse impact on the banking system. The decision to reorganize the bank will allow choices to be made that aim to give greater security to depositors and creditors of Balboa Bank & Trust Corp. for an early normalization of the situation in the bank and access to all of its funds.
As a holder of concessions for duty free shops WISA contributes 7% of the revenues of Tocumen SA, and its inclusion in Clinton list has rattled investors.
An article in Prensa.com reports that yesterday "... the stock broker Citivalores informed the Stock Exchange of Panama that the initial purchaser of the issue, Citigroup Global Markets, decided that the original conditions set out in the purchase agreement had not been met and voided the bond offer made on May 4 and whose closing date was May 11."
As a result of the inclusion of both companies in the "Clinton" list drawn up by the US Treasury Department, the respective Superintendents have ordered interventions.
For its part the Administration of Supervision and Regulation of Non-Financial Subjects activated special supervisions in non-financial companies which are listed by the OFAC as part of the network, in this case those operating in Colon Free Zone: Grupo Wisa, S.A., Vida Panama S.A., Servicio de Equipo Rodante Incorporado and Grupo Cima S.A., among others.
According to the nicaraguan regulator, the increasing amount of regulation and anti-money laundering controls that the US banks are subject to, has led some of them to remove their correspondent agencies from the country.
The president of the Association of Private Banks in Nicaragua (Asobanp), Juan Carlos Arguello, said in an article on Laprensa.com.ni that "...
The Global Financial Integrity report notes that between 2004 and 2013 the flows of money from Costa Rica from laundering and other illicit sources increased by 10% compared to the period 2003-2012.
EDITORIAL
The report entitled "Illicit Financial Flows from Developing Countries: 2004-2013" by Global Financial Integrity, shows that during the 10 years in question, the flow of illicit money from Costa Rica exceeded $11 billion.
The Financial Action Task Group has removed Nicaragua from the list of countries that pose risks relating to money laundering and terrorist financing.
From a press release by The Financial Action Task Force (FATF):
Jurisdictions no Longer Subject to the FATF’s On-Going Global AML/CFT Compliance Process:
Nicaragua
The FATF welcomes Nicaragua’s significant progress in improving its AML/CFT regime and notes that Nicaragua has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in June 2011. Nicaragua is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Nicaragua will work with GAFILAT as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.
The two nations have been included in the list of countries with deficiencies in the fight against money laundering and terrorist financing.
The Financial Action Group, assigned to the Organization for Economic Cooperation and Development noted that Panama and Nicaragua are in breach of the recommendations that the agency provides to improve controls for preventing money laundering in the financial system.
Adherence to the group known as GAFISUD by its initials in Spanish will strengthen the work on preventing and combating money laundering and repressing terrorist financing .
A press release from the Superintendency of Banks of Guatemala reads:
The Government of the Republic of Guatemala reported that the incorporation of country into the Financial Action Task Force of South America (GAFISUD) was unanimously passed during the "XXVII Plenary of Representatives Financial Action Task Force of South America (GAFISUD)" held in Buenos Aires, Argentina, from the 15th to 19th of July 2013.