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Fintech Companies in Chile Must Comply with Stricter AML and KYC Regulations

The Chilean financial system is subject to stricter Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations, aimed at preventing the misuse of financial services for illicit activities. As a result, fintech companies operating in Chile must ensure compliance with these regulations to avoid penalties and reputational damage.

Key Regulations

The AML regime in Chile is primarily governed by Law No. 19,913, which created the Financial Analysis Unit (UAF) and amended various provisions related to money laundering. Additionally, other laws such as Law No. 20,393 and Law No. 20,730 also deal with AML matters.

National Regulator

The UAF is the national regulator responsible for overseeing AML controls in Chile. The unit’s primary objective is to prevent and impede the use of the financial system and other sectors of Chilean economic activity to commit crimes related to money laundering and terrorism financing.

Responsibilities of the UAF

  • Oversee AML controls in Chile
  • Prevent and impede the use of the financial system for illicit activities
  • Investigate and impose sanctions on non-compliant entities

KYC Requirements

Fintech companies must conduct a thorough KYC process, which involves verifying the identity, suitability, and risks involved with maintaining a business relationship. The UAF has issued guidelines for conducting a typical KYC identification process, which includes:

  • Requesting certain information from customers and using that information to prevent and detect money laundering and financing of terrorism
  • Keeping special records, including the Customer Due Diligence and Customer Knowledge Register
  • Informing and providing the UAF with all necessary information, background, and documentation for suspicious transactions

When to Initiate KYC

Fintech companies must initiate the KYC process in the following cases:

  • Before or during the establishment of a permanent legal or contractual relationship between the customer and the company
  • When occasional transactions are carried out with a customer without a permanent relationship, exceeding USD 1,000
  • When there are suspicions of money laundering or terrorism financing

Outsourcing Customer Due Diligence

Chilean law does not explicitly prohibit outsourcing customer due diligence to third parties who are not obliged by law to comply with AML regulations. However, such outsourcing would not exempt the fintech company from its legal responsibility under applicable laws and regulations to comply with all KYC requirements.

Liability and Penalties

Fintech companies that fail to comply with AML and KYC regulations may face penalties, fines, and reputational damage. The UAF has the authority to investigate and impose sanctions on non-compliant entities.

In conclusion, fintech companies operating in Chile must ensure strict compliance with AML and KYC regulations to avoid severe consequences. Companies should implement robust risk management measures, conduct thorough customer due diligence, and maintain accurate records to demonstrate their commitment to adhering to these regulations.