Money laundering occurs when funds derived from criminal and illicit activities are concealed through financial operations to appear legitimate. This global issue affects all countries, regardless of their size. Governments and international organizations continuously implement strategies to prevent and combat financial crimes.
Efforts in El Salvador
El Salvador has taken significant steps to combat money laundering through the Financial System Superintendency (SSF), the main regulatory body overseeing financial institutions. For entities not supervised by the SSF, the Attorney General’s Office (FGR) enforces anti-money laundering regulations via the Financial Investigation Unit (UIF). These institutions monitor compliance with the Law Against Money Laundering and Asset Laundering.
New Regulatory Framework
On September 5, 2023, the NEW GUIDELINES FOR THE PREVENTION, DETECTION, AND CONTROL OF MONEY LAUNDERING, TERRORISM FINANCING, AND THE FINANCING OF WEAPONS OF MASS DESTRUCTION PROLIFERATION came into effect. This mandates that all companies, branches of foreign enterprises, and non-profit organizations in El Salvador must register and implement a risk-based approach to prevent financial crimes.
Current Registration Requirements
The previous accreditation process remains valid, as no modifications have yet been published in the UIF Registration or Accreditation Portals. Compliance Unit Establishment
Compliance Officer Appointment
Certify the appointment of a senior executive as the Compliance Officer via an official agreement.
Responsibilities include:
- Implementing a code of conduct and ethics.
- Ensuring compliance with the Law Against Money Laundering and Terrorism Financing.
- Developing internal procedures to detect and prevent financial crimes.
- Establishing effective control mechanisms to prevent illicit activities.
- Acting as a liaison with UIF and other regulatory bodies.
Due Diligence Manual Submission
- Present a Due Diligence and Know Your Customer (KYC) Manual outlining national and international compliance standards.
Annual Work Plan and Training Program
- Approve an Annual Work Plan for Compliance.
- Implement an Annual Institutional Training Program to ensure all employees remain informed about regulatory updates and financial crime prevention.
Technology and Audit Systems
- Implement risk management software to monitor and analyze suspicious financial activities.
- Establish an internal audit system to evaluate compliance effectiveness and fraud detection.
Additional Obligations Under the New Guidelines
In addition to the existing accreditation requirements, entities must comply with new obligations, including:
- Adopt policies for the prevention, control, and detection of unusual transactions.
- Have an institutional code of ethics.
- Create a Compliance Officer (only applies to obligated subjects and those supervised by an official institution).
- Appoint a Compliance Officer and their substitute.
- Establish a Risk Management System for the prevention of Money Laundering, Terrorism Financing, and Financing of the Proliferation of Weapons of Mass Destruction (LDA/FT/FPADM), in accordance with the operations and risk level of the society or entity, including the following elements: Policy and Procedure Manual; Due Diligence Procedures; Code of Ethics; Monitoring System; and Internal Audit Plan for LDA/FT/FPADM prevention.
- Develop policies that include enhanced due diligence procedures for risk mitigation, specifically for Politically Exposed Persons (PEPs) and high-risk qualified clients.
- Have an annual work plan for the Compliance Officer or designated Compliance Officer.
- Build an annual training plan for the prevention of LDA/FT/FPADM, including induction programs for new staff.
- Allocate the necessary human, financial, and technological resources for the implementation of applicable regulations for LDA/FT/FPADM prevention, according to the activities, nature, operations, and risk level of the society or entity.
- Establish an efficient and agile mechanism for the obligated subject to comply with orders to immobilize financial transactions and services, as well as assets, funds, rights, and goods ordered by the competent authorities.
- Define procedures for detecting and reporting suspicious and unusual transactions, ensuring the confidentiality of the reported information.
- Establish the consequences of non-compliance with policies and procedures for detecting and reporting suspicious and unusual transactions.
- Prioritize compliance with LDA/FT/FPADM prevention regulations over commercial goals and ensure that operations are conducted responsibly and securely, as established in the society or entity’s code of ethics.
- Develop procedures for filing, storing, and handling documentation confidentially.
- Ensure the technology and systems necessary to guarantee proper LDA/FT/FPADM risk prevention.
- Adopt computer systems that automatically and promptly generate alerts on transactions that deviate from the expected behavior of the client or counterparty.
The UIF’s prior accreditation requirements remain in force alongside the new regulatory framework. One of the most critical documents required is the Policies and Procedures Manual, detailing the minimum compliance measures established by UIF.
Given the complexity and mandatory nature of anti-money laundering regulations, it is crucial for all companies and entities to stay informed about the latest updates to mitigate legal and financial risks. For specialized legal advisory services regarding these requirements, do not hesitate to contact our experts.