Financial Crime World

Costa Rica’s Financial Institution Risk Management Under Scrutiny

A recent report evaluating Costa Rica’s compliance with global anti-money laundering (AML) and combating terrorist financing (CFT) standards has highlighted areas of improvement for the country’s financial institutions.

Report Highlights

The Costa Rica Follow-Up Report 2023 assesses the nation’s implementation of technical requirements set by the Financial Action Task Force (FATF) Recommendations. According to the report, Costa Rica scored well in several areas, including:

  • National cooperation and coordination (R.2)
  • Money laundering offence (R.3)
  • Terrorist financing offence (R.5)
  • Targeted financial sanctions related to terrorism and terrorist financing (R.6)
  • Regulation and supervision of financial institutions (R.26)

Areas for Improvement

However, the report also identified areas where Costa Rica fell short of expectations, including:

  • Non-compliance with new technologies (R.15) and international instruments (R.36)
  • Partial compliance regarding correspondent banking (R.13), financial institution secrecy laws (R.9), and DNFBPs: other measures (R.23)

Significance and Action Required

The report’s findings are significant as they highlight the importance of effective risk management practices for financial institutions operating in Costa Rica. The country’s authorities must take swift action to address these shortcomings and ensure that its financial system is resilient against money laundering, terrorist financing, and other illicit activities.

Response and Recommendations

In response to the report’s recommendations, Costa Rican authorities have pledged to strengthen their efforts in implementing AML/CFT measures, including:

  • Enhancing customer due diligence (R.10)
  • Record keeping (R.11)
  • Internal controls (R.18) for financial institutions

Conclusion

As Costa Rica continues to work towards improving its compliance with FATF standards, it is essential that financial institutions take proactive steps to assess their own risk management practices and ensure they are in line with international best practices. By doing so, Costa Rica can maintain a strong reputation as a responsible and transparent financial hub in the region.

  • Financial institutions operating in Costa Rica should:
    • Conduct regular risk assessments
    • Implement robust AML/CFT measures
    • Ensure compliance with FATF standards
  • The country’s authorities must:
    • Strengthen their efforts in implementing AML/CFT measures
    • Provide adequate resources and support to financial institutions
    • Monitor and enforce compliance with AML/CFT regulations