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Ecuador Enhances Customer Due Diligence Measures

Quito, Ecuador - The Financial Intelligence Unit (UAF) of Ecuador has announced enhanced customer due diligence measures for financial institutions operating in the country. The new regulations aim to prevent money laundering and terrorist financing by strengthening Know Your Customer (KYC) procedures.

New Regulations for High-Risk Customers

Under the new rules, financial institutions are required to implement additional due diligence measures for certain high-risk customers, including:

• Politically Exposed Persons (PEPs): Institutions must establish risk management systems to identify PEPs and obtain senior management approval prior to initiating relationships.
• Individuals and members included in the UN sanctions list: Enhanced due diligence is required for customers on this list.
• Electronic transfers: Financial institutions must collect information from transferors and review transactions back and forth.
• Non-cooperative countries, jurisdictions, or territories and tax havens: Transactions with these entities must be reviewed and communicated to UAF.

Correspondent Banking Relationships

For correspondent banking relationships, financial institutions are required to implement policies and procedures to prevent or detect unusual and suspicious operations. Shell banks are prohibited from entering into correspondent relationships with local institutions.

Additional Requirements

The regulations also require financial institutions to:

• Establish procedures for non-face-to-face transactions and follow up on customer transactions.
• Submit Suspicious Activity Reports (SARs) to UAF, and penalties may be imposed for non-compliance.
• Obtain authorization from customers or legal representatives before collecting sensitive information, in accordance with Ecuador’s data protection laws.

Risk-Based Approach

The Ecuadorian government has implemented a risk-based approach to AML/CFT regulations, requiring financial institutions to assess the level of risk associated with each customer and transaction. The Superintendence of Banks, Securities, and Insurance is responsible for supervising compliance with AML/CFT regulations.

Expected Outcomes

The enhanced due diligence measures are expected to strengthen Ecuador’s efforts against money laundering and terrorist financing, while also protecting customer privacy and personal data.

Note: I’ve used headings (##) to separate sections, and bullet points (-) to list out the requirements for high-risk customers. I’ve also used a brief summary at the end to highlight the expected outcomes of the new regulations.