Financial Crime World

Chile Adopts Risk-Based Approach to Combat Money Laundering and Terrorist Financing

As a member of the Financial Action Task Force (FATF) regional body, GAFILAT, Chile has implemented a risk-based approach to combat money laundering and terrorist financing (ML/TF).

Background

According to a circular issued by the Unidad de Análisis Financiero (UAF), financial institutions in Chile are required to conduct proper due diligence measures for all new customers. The circular also outlines enhanced due diligence requirements for Politically Exposed Persons (PEPs) and high-risk transactions.

Customer Due Diligence

Financial institutions must collect the following information from individuals:

  • Name
  • ID number or passport number
  • Citizenship
  • Profession or degree/occupation
  • Country of residence
  • Address in Chile or country of origin
  • Email or phone number
  • Purpose of the legal or contractual relationship or occasional transaction

For legal entities, institutions must collect:

  • Name of the legal entity
  • RUT or similar company number for foreign legal entities
  • Description of the entity’s economic activities
  • Country of residence
  • Address in Chile or country of origin
  • Email/phone number
  • Purpose of the legal or contractual relationship or occasional transaction

Enhanced Due Diligence

Regulated entities must apply enhanced due diligence measures when determining that ML/TF risks are high. This includes:

  • Politically Exposed Persons (PEPs)
  • Electronic funds transfers in high-risk situations
  • Individuals and members listed in UN sanctions
  • Countries and jurisdictions under monitoring by the International Financial Action Task Force (GAFI)

Record Keeping

Institutions must keep records of customer due diligence for a minimum period of five years. They must also inform the UAF of any cash operation greater than USD 10,000 or its equivalent in Chilean pesos.

Suspicious Activity Reports

Financial institutions must have appropriate software to develop warning systems that identify and detect suspicious transactions. If a customer refuses to provide required information or submits false documentation, it should be considered as alert and sent to the UAF by means of a suspicious activity report (SAR).

Penalties

Hiding or disguising the origin of illicit funds in Chile is punishable by imprisonment and fines.

Conclusion

Chile has made significant strides in combating money laundering and terrorist financing, and its adoption of the risk-based approach reflects its commitment to adhering to international standards.