Anti-Money Laundering (AML) Regulations in Chile: A Guide for Financial Institutions

Customer Due Diligence (CDD)

Financial institutions in Chile must conduct Customer Due Diligence (CDD) in three circumstances:

• Before or during the establishment of a permanent legal or contractual relationship: Institutions must verify the identity and background of clients before establishing a business relationship.
• When a transaction amounts to or greater than USD 1,000 with a client with whom there is no permanent legal or contractual relationship: For non-recurring transactions above $1,000, institutions must conduct CDD on the client.
• When there are suspicions of money laundering (ML)/terrorism financing (TF), regardless of the amount of transactions: Institutions must conduct CDD when they suspect ML/TF activity.

Enhanced Due Diligence

Institutions must apply enhanced CDD measures when ML/TF risks are high in relation to a client, product, or service:

• Politically Exposed Persons (PEPs): Enhanced due diligence procedures are required for PEPs.
• Electronic funds transfers considered ‘high-risk’: Institutions must conduct enhanced due diligence on high-risk transactions.
• Individuals and members listed in “Comité de Sanciones ONU” (UN sanctions) and countries/jurisdictions under the International Financial Action Task Force (GAFI) monitoring process: Enhanced due diligence is required for clients from sanctioned countries or those under GAFI monitoring.
• Countries/jurisdictions listed by the Chilean Tax Service or those with preferential tax regimes: Institutions must conduct enhanced due diligence on clients from these jurisdictions.

Politically Exposed Persons (PEPs)

For PEPs, institutions must implement enhanced due diligence procedures:

1. Obtain information about the intended nature of the relationship.
2. Information on the origin of the client’s funds and assets.
3. Approval from senior management to begin or continue the legal or contractual relationship.
4. Additional information from the client and updating more frequently the information and identification documents of the client and final beneficiary.

Record Keeping

Affected institutions must keep records for a minimum period of five years and inform the Financial Analysis Unit (UAF) when required, of any cash operation greater than ten thousand dollars USD or its equivalent in Chilean pesos.

Suspicious Activity Reports

Institutions must have appropriate software to develop warning systems that identify and detect suspicious transactions. If during CDD a customer refuses to provide all or part of the required information or documentation, or submits something false, it should be considered as alert and sent to the UAF by means of a suspicious activity report (SAR). Cash transactions of over USD 10,000 or its equivalent in Chilean pesos must also be reported.

Penalties

Hiding or disguising the origin of illicit funds in Chile is punishable by five years and one day to fifteen years in prison and a fine of two hundred to one thousand monthly tax units. The final penalty will depend on the amounts involved, the size and nature of the entity, its economic capacity, the extent of the harm caused, and the seriousness of the consequences in case of public enterprises.