Financial Crime World

Best Practices for AML/CFT Compliance in Peru: Understanding Key Risks and Challenges

As organizations operating in Latin America and the Caribbean, it’s essential to understand the unique Anti-Money Laundering (AML) challenges and laws that apply to each jurisdiction. In this article, we’ll examine the key AML risks and requirements in Peru and provide guidance on how to assess customer, geographic, or matter risk.

Understanding the Challenges

Despite a robust commitment to anti-money laundering regulations, enforcement in Peru is still lacking, with investigations and prosecutions not meeting expected standards. The country’s informal economy, which employed around 70% of the population prior to the COVID-19 pandemic, presents significant risks of tax evasion, corruption, and money laundering.

Key Risks

  • The mining sector poses a major risk for AML and corruption, with illegal mining operations driving poverty and lack of government oversight.
  • Peru is also a key producer of cocaine, serving as a transit point for drugs being trafficked into North America and Europe.
  • Porous borders allow illegal goods and money to pass through undetected, further complicating AML efforts.

The Impact

According to estimates, between $3.2 billion and $7.9 billion is laundered annually in Peru.

Regulations and Laws

To address these challenges, the Peruvian government has implemented a National Plan Against Money Laundering and Terrorist Financing, which aims to mitigate money laundering risks across the economy.

The main laws regulating AML/CFT in Peru include:

  • Legislative Decree 1106
  • Law Decree 25475
  • Law 30737
  • Law 28950
  • Law 22095
  • Legislative Decree 1327

These regulations cover a range of topics, including:

  • Money laundering
  • Illegal mining
  • Organized crime
  • Terrorist financing
  • Human trafficking
  • Drug trafficking
  • Corruption

Weaknesses in the System

Despite these regulations, several weaknesses remain, including:

  • Cash traders, banks, and real estate companies being key channels for financial crimes and cash laundering
  • Mining activities contributing to AML and corruption risks
  • Remittances from abroad increasing opportunities for money laundering
  • The informal economy allowing financial crimes to go undetected
  • Insufficient knowledge of financial crime and resources for supervisory authorities and law enforcement
  • Public financed projects, government assistance, and political campaigning being susceptible to money laundering and corruption

Cryptocurrency Concerns

Cryptocurrency is also a growing concern in Peru, with the country ranking among the top three in Latin America for cryptocurrency use.

Staying Compliant

To stay compliant, organizations operating in Peru should prioritize several key steps:

  • Conduct thorough customer due diligence and ongoing monitoring
  • Implement robust risk assessment procedures
  • Utilize financial intelligence reports to identify suspicious transactions
  • Report any suspicious activity to the relevant authorities
  • Stay up-to-date with changing regulations and guidance

By understanding these risks and challenges, organizations can ensure compliance with AML/CFT requirements in Peru and mitigate the risk of money laundering and terrorist financing.