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Financial Crime Risk Assessment Tools Crucial for El Salvador Businesses Amid Ongoing Money Laundering Concerns
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Date: October 14th, 2022
El Salvador’s businesses must prioritize the use of financial crime risk assessment tools to mitigate potential risks in light of significant challenges in its fight against money laundering.
A Growing Hub for Illicit Financial Activities
The country’s unique economic landscape, which includes a dollar economy and growing cryptocurrency industry, has made it an attractive hub for illicit financial activities. The use of Bitcoin as legal tender has raised concerns about regulatory compliance and the ability to conduct proper know-your-customer (KYC) requirements.
Money Laundering Concerns
According to recent estimates, approximately $378 million-$946 million is laundered every year in El Salvador. This figure underscores the need for businesses to implement robust anti-money laundering (AML) measures to avoid becoming complicit in illicit activities.
Key Risks and Challenges
- The country’s AML regime has been criticized for being weakly implemented, with rampant political impunity from prosecution contributing to a lack of accountability.
- The government’s decision to terminate cooperation with the OAS anti-corruption body and prohibit banks from closing accounts of individuals under investigation for financial crimes has raised concerns about the protection of corrupt government officials.
AML Policy Summary
The country is considering significant reforms to its AML regime, but progress remains slow. Enforcing Bitcoin as legal tender has created challenges in complying with FATF regulations regarding virtual-asset transactions, making it difficult for businesses to conduct proper KYC requirements.
Businesses Must Act Now
To avoid potential fines and reputational damage, businesses operating in El Salvador must prioritize the use of financial crime risk assessment tools to identify and mitigate AML risks. This includes:
- Conducting thorough customer due diligence
- Implementing robust AML policies and procedures
- Providing regular training for employees on AML compliance
By taking proactive steps to address AML concerns, businesses can minimize their exposure to potential financial crimes and contribute to a safer and more stable business environment in El Salvador.
VinciWorks Guide
For more information on the key AML challenges and laws in Latin America and the Caribbean, VinciWorks has created a comprehensive guide designed to support businesses operating or planning to expand into the region. The guide provides an overview of some of the key AML issues and includes a country-by-country assessment of AML risks and laws.