Ecuador Tackles Financial Crime with Stricter Banking Laws

The Ecuadorian government has been taking steps to prevent financial crime and strengthen its banking sector, according to a recent report from the State Department’s Office of Investment Affairs. The measures aim to increase transparency and oversight in the country’s financial markets.

Strengthening Regulatory Framework

One key development is the creation of the Securities Market Regulation Board by the 2014 Law to Strengthen and Optimize Business Partnerships and Stock Markets. This board oversees the stock markets, but investment options are limited due to a lack of liquidity on the Quito and Guayaquil exchanges.

Restricting Bank Activities

The country’s largest banks, including Banco Pichincha, Banco Pacifico, Banco Produbanco, and Banco Guayaquil, have been subject to new restrictions in recent years. In 2012, most banks sold off their brokerage firms, mutual funds, and insurance companies in compliance with constitutional changes following a May 2010 referendum.

Regulatory Reforms

• Organic Monetary and Financial Code (2014): Established a five-person Monetary and Financial Policy and Regulation Board to regulate the banking sector.
• Regulation 29 (2012): Requires all financial transfers to be channeled through the Central Bank’s accounts, increasing oversight and preventing banks from netting their inflows and outflows.

Foreign Investment and Remittance

Foreign investors in Ecuador can remit 100 percent of net profits and capital, subject to a five percent capital exit tax. However, Resolution 107-2015-F from the Monetary and Finance Board exempted some payments to foreign lenders from this tax, provided that certain conditions are met.

International Recognition

The Financial Action Task Force (FATF) removed Ecuador from its list of countries with strategic deficiencies in anti-money laundering and countering the financing of terrorism regimes in October 2015. The government does not maintain a Sovereign Wealth Fund.