Compliance Risks in Banking Sector in Guatemala on the Rise as Economy Rebounds from COVID-19 Pandemic
The banking sector in Guatemala has experienced a significant rebound following the COVID-19 pandemic, with credit rating agencies raising its rating due to its resilient economy and long-standing macroeconomic stability. However, this growth comes with increased compliance risks that financial institutions must navigate.
Banking Sector Growth
According to recent data, private sector credit in Guatemala has seen a notable increase, reaching GTQ213,048.90 million in March 2023. The Bank of Guatemala, the country’s central bank, has raised interest rates to 5% in an effort to control inflation, which stands at 8.32% as of April 2023.
Compliance Risks
Despite efforts by regulatory bodies such as the Banking Superintendence (SIB) and the Guatemalan Financial Intelligence Unit to prevent money laundering and financing of terrorism, compliance risks remain a significant concern in Guatemala’s banking sector. The country’s civil and commercial justice system is currently undergoing a transition towards electronic procedures, which could lead to delays and inefficiencies if not properly implemented.
New Compliance Challenges
Recent legislative developments aimed at improving economic and investment conditions may create new compliance challenges for financial institutions, including:
- The new Leasing Act
- The Act to Promote Investment of Foreign Capital
- Amendments to the country’s Free Trade Zones Act
Mitigating Risks
To mitigate these risks, financial institutions in Guatemala must ensure that they have robust compliance programs in place, including effective anti-money laundering (AML) and combating the financing of terrorism (CFT) controls. They must also stay up-to-date with changing regulations and legislation to avoid non-compliance.
Guidance from Mayora & Mayora
The Banking and Finance Practice Group at Mayora & Mayora is well-equipped to provide guidance to financial institutions on compliance matters, including:
- Structuring contracts
- Secured transactions
- Ensuring compliance with local banking regulations
Our professionals have extensive experience in both the private and public sector, as well as dedicated litigation specialists who can help clients navigate complex regulatory environments.
Conclusion
As Guatemala’s economy continues to rebound from the pandemic, it is essential that financial institutions prioritize compliance and risk management to avoid potential penalties and reputational damage. By staying ahead of changing regulations and implementing robust compliance programs, financial institutions can ensure a strong and sustainable future in Guatemala’s banking sector.