El Salvador’s Controversial New Regulation: Money Launderers Maintain Bank Accounts During Criminal Investigations

The Financial System Superintendence (SSF) of El Salvador, under the leadership of Héctor Gustavo Villatoro, has issued a new regulation allowing suspected and formally accused money launderers to keep their bank accounts open despite ongoing criminal investigations. This regulation, in contrast to El Salvador’s Law Against Money Laundering, could harm international relations and the country’s ongoing battle against financial crimes.

Maintaining Access to Assets During Criminal Proceedings

In a December memo, Villatoro instructed banks against terminating business relationships with individuals under investigation or formal accusation, stating that banks cannot base decisions on a “presumed culpability.” This regulation permits suspected money launderers to control their assets throughout the criminal court cases.

Implications for Individuals Under Investigation

Individuals involved in bribery schemes and money laundering operations, such as former Attorney General Luis Mártinez and businessman Enrique Rais, can maintain their financial holdings. Both Mártinez and Rais were arrested in 2016 for defrauding the judicial system, bribing public officials, and creating an organized crime structure. While Mártinez is currently imprisoned and has yet to see his account closed, Rais remains at large in Switzerland.

Villatoro’s Role in the Issue and Criticism

Villatoro drew criticism due to his history, having previously served as the director of customs under former president Elías Antonio Saca. Saca was later charged with embezzlement and money laundering, which led to a 10-year prison sentence. El Salvador made significant progress in seizing and forfeiting criminal assets before regaining membership in the Egmont group in 2019.

However, the new SSF regulation weakens the Financial Investigation Unit (UIF)’s autonomy, potentially enabling corrupt officials to retain control over ill-gotten assets while facing investigations.

Previous Achievements in Combating Money Laundering

Despite commendations for assets seizures and forfeitures from the US Department of State in 2020, the new regulation raises concerns about El Salvador’s dedication to international financial standards. Money laundering, embezzlement, and bribery schemes remain prevalent among El Salvador’s government officials and economic elites, and this regulation could further legalize the status quo.

Previous Suspension and Reinstatement from Egmont Group

El Salvador was suspended from the Egmont Group in 2016 due to a vetoed amendment that would have granted more autonomy to the Attorney General’s Office’s Financial Investigation Unit (UIF). After significant progress, El Salvador gained membership back in 2019. The following years brought advancements in seizing and forfeiting criminal assets, adding 15 prosecutors to money laundering and asset forfeiture units, and obtaining the first money laundering convictions against MS-13 gang members.

Ongoing Concerns and Challenges

Despite these achievements, the new SSF regulation undermines the progress made in combating money laundering and financial crimes in El Salvador, endangering the country’s ability to collaborate internationally and maintain a clean financial reputation.