Financial Crime World

El Salvador Compliance Risk Assessment Templates: Understanding Key Challenges and Laws

Conducting risk assessments or reviewing client due diligence in El Salvador requires an understanding of the country’s money laundering challenges and laws. VinciWorks explores the key AML risks, laws, and regulations that organizations should consider when assessing customer, geographic, or matter risk.

Key Risks

  • Bulk Cash Smuggling: El Salvador’s dollar-based economy and acceptance of Bitcoin as legal tender create opportunities for bulk cash smuggling.
  • Cryptocurrency Investment: The country’s rapid fluctuations in cryptocurrency value raise financial stability concerns.
  • Chinese Influence: Chinese influence has driven key corruption and money laundering risks in the country.
  • Political Interference: Political interference and extortion remain significant challenges in El Salvador.
  • Potential Grey Listing: Potential grey listing by the Financial Action Task Force (FATF) is also a concern.

Criminal Proceeds

  • An estimated $378 million to $946 million is laundered annually in El Salvador.

AML Policy Summary

El Salvador’s AML laws are seen as weak, with rampant political impunity from prosecution. The country is considering significant reforms to its AML regime due to international concerns.

  • US Sanctions: The US has banned dozens of El Salvadorians for corruption reasons, and some have been indicted for money laundering and accepting bribes.
  • President’s Reforms: President Nayib Bukele shows no sign of stepping back from his controversial reforms, which include the Bitcoin law.

Key Money Laundering Laws in El Salvador

  • The Law on Money and Asset Laundering
  • The Special Law Against Acts of Terrorism
  • The Banking Law
  • The Law on Citizen Participation
  • The Law on Access to Public Information
  • The Bitcoin Law

Weaknesses

  • Lack of Political Will: There is a lack of political will to update El Salvador’s AML regime.
  • Regulatory Difficulties: Regulatory difficulties around the Bitcoin law and KYC procedures threaten the country’s international reputation.
  • Lack of Transparency: There is also a lack of beneficial ownership transparency.

Strengths

  • International Cooperation: El Salvador works closely with the US in training judges and improving efficiency in the judicial process.
  • Technical Assistance: The government has requested technical assistance from the World Bank to develop a regulatory framework for Bitcoin.

VinciWorks Guide

VinciWorks has created a guide designed to support businesses operating or planning to operate in Latin America and the Caribbean, including El Salvador. This guide provides an overview of key AML challenges and issues, as well as country-by-country assessments of AML risks and laws.

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To learn more about compliance risk assessment templates in El Salvador, download your free copy now.