El Salvador Enhances Financial Compliance

EL SALVADOR MOVES TO STRENGTHEN FINANCIAL TRANSACTION DUE DILIGENCE

Government of El Salvador Enhances Due Diligence for Financial Transactions

San Salvador, El Salvador - March 24, 2022

The government of El Salvador has taken a significant step to enhance due diligence for financial transactions in the country. New instructions aimed at preventing money laundering and asset laundering have been introduced.

Key Developments

New guidelines for the Financial Investigation Unit: Published on October 26, 2021, agreement number 380 of the Attorney General’s Office introduces new guidelines that will come into effect on June 6, 2022.
Integration of FATF recommendations: The updated regulations incorporate recommendations from the Financial Action Task Force (FATF) to ensure compliance with international standards on risk management and best practices.

Focus on Risk-Based Compliance Scheme

The new instructions focus on the design of a risk-based compliance scheme, which involves assessing the risks associated with a company’s or sector’s economic activity. This approach will allow financial institutions and fintech companies to adapt their policies and procedures to virtual channels, including:

Transactional monitoring: The use of new technologies such as artificial intelligence, biometric recognition, and blockchain-based KYC solutions.
Document backup: Ensuring comprehensive regulatory compliance without compromising user experience.

100% Digital Contracting

The integration of FATF recommendations has also led to the inclusion of 100% digital contracting in the regulations. This move is expected to alleviate concerns among fintech operators regarding regulatory compliance.

Government Spokesperson’s Statement

“El Salvador’s move to strengthen due diligence for financial transactions demonstrates its commitment to fighting money laundering and asset laundering,” said a government spokesperson. “The new instructions will help ensure that fintech companies can operate their business under a regime of legal certainty, while also safeguarding the user experience.”

Implementation and Expected Outcomes

Fintech companies in El Salvador are expected to adapt to the new regulations. The implementation of the new instructions is seen as a significant step towards enhancing financial transaction due diligence in El Salvador. The government’s commitment to fighting money laundering and asset laundering is expected to contribute to a more stable and secure financial environment for both domestic and international businesses operating in the country.

The new guidelines are designed to ensure that fintech companies can operate under a regime of legal certainty, while also safeguarding the user experience.