Financial Crime World

Banks in El Salvador Must Adapt to New Anti-Money Laundering Regulations

New Regulations for Financial Institutions in El Salvador

San Salvador, March 24, 2022 - As of June 6, 2022, banks and financial institutions in El Salvador must comply with new regulations on anti-money laundering and asset laundering. These instructions, published by the Attorney General’s Office on October 26, 2021, incorporate recommendations from the Financial Action Task Force (FATF) to ensure international standards are met.

Key Changes

  • Risk-based compliance scheme: Financial institutions must implement a risk-based approach to prevent money laundering.
  • Use of new technologies: Institutions must use advanced technologies such as virtual channels for transactional monitoring, document backup, and customer due diligence (KYC).
  • 100% digital contracting: The regulations focus on virtual channels, recognizing the growing importance of digital products and business practices in the financial sector.

Opportunities and Challenges for Fintechs

The new changes offer an opportunity for Fintechs to operate with legal certainty, but also represent a challenge in safeguarding user experience without losing sight of regulatory compliance. To adapt to these requirements, financial institutions can use tools such as:

  • Artificial intelligence: For transactional monitoring
  • Biometric recognition: Proof of life through photographs or videos
  • KYC solutions in blockchain

Prioritizing Regulatory Compliance

Financial institutions must now prioritize regulatory compliance, particularly those operating in unregulated or under-regulated environments. The new regulations provide a clear framework for compliance, allowing Fintechs to adapt their flows and ensure that their business models are compliant with the regulatory framework.

Enhancing Transparency and Preventing Money Laundering

With these changes, El Salvador’s financial authorities aim to enhance transparency and prevent money laundering in the country’s financial sector. As a result, banks and financial institutions must now invest in digital technologies and risk management strategies to stay ahead of regulatory requirements and maintain a competitive edge in the market.