El Salvador Takes Steps to Enhance Compliance with FATF Recommendations

Strengthening its Financial System Against Money Laundering

In an effort to bolster its financial system, the government of El Salvador has published new instructions for the Financial Investigation Unit. These guidelines will come into effect on June 6, 2022, and are designed to integrate the recommendations of the Financial Action Task Force (FATF) in combating money laundering and terrorist financing.

Enhancing Risk Management and Best Practices

The new instructions include provisions for a risk-based compliance scheme and the use of new technologies to prevent illicit activities. This move aims to:

• Prevent Money Laundering: By employing a risk-based approach, businesses can identify potential risks and take steps to mitigate them.
• Adopt New Technologies: Fintech companies will be able to leverage innovative solutions such as artificial intelligence, biometric recognition, and blockchain-based KYC systems.

Recognizing 100% Digital Products and Business Practices

The new regulations recognize the importance of digital channels in modern business. This includes:

• Transactional Monitoring: Fintechs will need to implement effective monitoring systems to detect suspicious transactions.
• Document Backup: Businesses must maintain accurate records of customer due diligence (KYC) procedures.
• Customer Due Diligence: Companies must conduct thorough KYC checks on customers.

Positive Step Towards Enhancing Financial System

Industry observers believe that the new regulations represent a significant step towards creating a more secure and transparent financial system in El Salvador. By integrating FATF recommendations, the country demonstrates its commitment to preventing money laundering and promoting transparency in financial transactions.

Leveraging Technology for Compliance

As the world becomes increasingly digital, the use of new technologies has become essential for businesses operating in the Fintech space. The new instructions in El Salvador provide a regulatory framework that allows companies to leverage technology while ensuring compliance with anti-money laundering laws.

Creating a Balanced Financial System

The move is seen as a step towards creating a more secure and transparent financial system in El Salvador, one that balances the needs of businesses with the need for effective regulation.