Financial Crime World

Ecuador Takes Steps to Prevent Financial Crime, Strengthen Banking Regulations

The Ecuadorian government has been working diligently to prevent financial crime and strengthen banking regulations in recent years. In this article, we will explore the key developments that have been implemented to achieve these goals.

Improving Oversight and Reducing Money Laundering Risks

In 2014, the Securities Market Regulation Board was created through the Law to Strengthen and Optimize Business Partnerships and Stock Markets. This move has increased transparency and accountability in Ecuador’s capital markets, which were previously limited by a lack of liquidity.

  • Increased Transparency: The creation of the Securities Market Regulation Board has led to improved oversight and greater transparency in Ecuador’s capital markets.
  • Reduced Money Laundering Risks: By increasing transparency and accountability, the risk of money laundering has been reduced, making it more difficult for criminals to hide their illicit activities.

Strengthening Banking Regulations

Ecuador’s Superintendence of Banks regulates the country’s financial sector with more authority than ever before. Since 2012, banks have been subject to stricter regulations, including a requirement that they divest from non-financial companies and comply with constitutional changes aimed at reducing concentration of wealth.

  • Stricter Regulations: Ecuador’s Superintendence of Banks has implemented stricter regulations for banks, including requirements for divesting from non-financial companies.
  • Reducing Concentration of Wealth: Constitutional changes have aimed to reduce concentration of wealth in the financial sector, promoting a more equitable distribution of resources.

The Organic Monetary and Financial Code

The Organic Monetary and Financial Code, published in 2014, further strengthened banking regulation by establishing the five-person Monetary and Financial Policy and Regulation Board. This board is responsible for setting monetary policy and regulating the banking sector, including prioritizing sectors for lending from private banks.

  • Establishing a Regulatory Framework: The Organic Monetary and Financial Code has established a regulatory framework for the banking sector, promoting stability and predictability.
  • Prioritizing Sectors for Lending: The board is responsible for prioritizing sectors for lending from private banks, ensuring that resources are allocated efficiently.

Preventing Money Laundering

Ecuador’s Central Bank has also taken steps to prevent money laundering by requiring all financial transfers to be channeled through its accounts since 2012. This move allows for greater oversight of transactions and helps prevent banks from avoiding taxes on capital exits.

  • Greater Oversight: Requiring financial transfers to be channeled through the Central Bank’s accounts has allowed for greater oversight of transactions.
  • Preventing Tax Evasion: This measure has helped prevent banks from avoiding taxes on capital exits, promoting a more level playing field.

Foreign Investors and Capital Exit Tax

Foreign investors in Ecuador are subject to a five percent capital exit tax, but they can remit 100 percent of net profits and capital without restriction. However, recent regulations have exempted certain payments to foreign lenders from this tax under specific conditions.

  • Capital Exit Tax: Foreign investors in Ecuador are subject to a five percent capital exit tax.
  • Exemptions for Foreign Lenders: Certain payments to foreign lenders are exempt from the capital exit tax under specific conditions.

Progress with the FATF

In a significant development, 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 2015. This move reflects the country’s progress in strengthening its financial regulations and reducing money laundering risks.

  • Progress with the FATF: The FATF has recognized Ecuador’s efforts to strengthen its financial regulations and reduce money laundering risks.
  • Removing Deficiencies: Ecuador has made significant progress in addressing strategic deficiencies, demonstrating a commitment to combating financial crime.

Conclusion

In conclusion, Ecuador’s efforts to prevent financial crime and strengthen banking regulations have been aimed at increasing transparency, accountability, and oversight in the country’s financial sector. While there is still more work to be done, these developments are a positive step towards improving Ecuador’s investment climate and reducing the risk of financial crime.