El Salvador Faces Challenges in Compliance with International Anti-Money Laundering and Counter-Terrorist Financing Recommendations

Assessment Raises Concerns Over AML/CFT Measures

A recent evaluation by the Caribbean Financial Action Task Force (CFATF) has highlighted concerns over El Salvador’s compliance with international anti-money laundering and counter-terrorist financing (AML/CFT) recommendations. The Central American nation, a member of the CFATF, received a mixed assessment in its mutual evaluation report, sparking fears that it may be vulnerable to illicit financial activities.

Progress and Gaps in AML/CFT Framework

According to the report published on the CFATF website, El Salvador has made progress in strengthening its AML/CFT framework. However, significant gaps remain in key areas:

• Customer due diligence requirements: Financial institutions need to improve their customer due diligence processes to prevent money laundering and terrorist financing.
• Asset tracing and freezing: The country faces challenges in effectively tracing and freezing assets related to suspicious transactions.
• Non-financial businesses: El Salvador needs to implement effective measures to prevent the misuse of non-financial businesses, such as real estate and casinos.

International Concerns and Implications

The CFATF’s evaluation of El Salvador’s AML/CFT measures is a significant concern for the international community, given the country’s position as a key player in regional trade and finance. Failure to address these issues may expose El Salvador’s financial system to increased risks of money laundering and terrorist financing.

Government Response and Uncertainty

In response to the assessment, the government of El Salvador has pledged to implement the necessary reforms to strengthen its AML/CFT framework. However, the country’s ability to meet these commitments remains uncertain, raising concerns about the effectiveness of its efforts to combat illicit financial activities.