Costa Rica Considers Proposed Law to Curtail Cash Transactions, Raising Freedom Concerns

A Move to Combat Money Laundering and Terrorism Financing?

In a recent move aimed at combating money laundering and terrorism financing, Costa Rica’s legislative assembly has proposed a law that could significantly restrict the use of cash transactions above $10,000. The proposed legislation, Bill Nº 20.438, seeks to eliminate the use of cash for transactions exceeding this threshold, mandating instead that all such transactions be conducted via bank wire transfer.

The Proposal: Restrictions on Cash Transactions

The proposal has sparked a heated debate over its implications for personal freedom and the right to use cash. Under the proposed legislation:

• Any transaction involving the transfer of movable or immovable properties exceeding $10,000 would need to be conducted through financial institutions regulated by Costa Rica’s Financial Regulatory Agencies.
• This would effectively prohibit cash transactions above this threshold, forcing individuals and businesses to use the banking system instead.

Definition of “Cash” and Rigorous Declarations

The law defines “cash” not only as physical currency but also negotiable instruments and other bearer payment methods, which could further restrict private transactions. The proposal mandates rigorous declarations and verification for transactions subject to the law, requiring parties to disclose:

• The payment method used in the transaction
• The origin of funds

Notaries public overseeing such transactions would be required to:

• Verify that the transaction was completed via bank wire transfer
• Document the transaction’s amount and payment method
• Ensure that parties sign a sworn declaration regarding the source of funds used in the transaction

Consequences of Non-Compliance

Failure to comply with these requirements could result in the National Registry refusing to register the document.

Proponents and Critics Weigh In

Proponents of the law argue that it will align Costa Rica with international standards for combating financial crimes. However, critics warn that it could mark the beginning of the end for cash transactions in the country, potentially eroding personal freedom and the right to use cash.

A Delicate Balance

The debate surrounding this proposal highlights the delicate balance between combating financial crime and protecting individual rights and freedoms. While the intent behind the law may be noble, its implementation could have far-reaching consequences for individuals and businesses in Costa Rica.