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El Salvador’s Hollow Fight Against Financial Crime
In a shocking move, El Salvador’s financial regulatory agency has instructed banks not to close the accounts of suspected or formally accused money launderers, exposing the country’s hollow fight against corruption.
New Regulation Undermines Anti-Money Laundering Efforts
The new regulation, which contradicts El Salvador’s Law Against Money Laundering and Other Assets, permits suspected money launderers to control their assets even after the start of criminal court cases. According to a memo released by Héctor Gustavo Villatoro, head of the Financial System Superintendence (Superintendencia del Sistema Financiero - SSF), banks “cannot terminate commercial relations founded in a decision of presumed culpability.” This means that even if an individual is accused of money laundering or other financial crimes, their bank account will not be closed, allowing them to continue accessing their assets.
Recent Efforts to Combat Corruption and Money Laundering
In 2019, the country added 15 prosecutors to its money laundering and asset forfeiture units, obtained its first money laundering convictions against MS-13 gang members, and was reinstated in the Egmont group, an international association of Financial Intelligence Units dedicated to upholding international standards against money laundering and terrorist financing.
However, these efforts have been undermined by the SSF’s new regulation, which legitimizes legal loopholes that allow corrupt officials to maintain control over their assets, even while fleeing prosecution.
Examples of Corrupt Officials with Open Bank Accounts
- Luis Mártinez: El Salvador’s former Attorney General, who was arrested in 2016 for conspiring to defraud the judicial system. Despite being accused of converting the Attorney General’s Office into a pay-to-play shop, where he accepted lucrative gifts in exchange for stopping or delaying corruption investigations, Mártinez remains in prison awaiting trial.
- Enrique Rais: A prominent businessman who was arrested alongside Mártinez and found to have created an organized crime structure that bribed public officials to obtain court rulings favorable to his waste disposal company. Despite being accused of money laundering and other financial crimes, Rais’ bank account has yet to be closed, allowing him to continue accessing his assets.
The Man Behind the Regulation
Gustavo Villatoro, the head of the SSF, was appointed director in July 2020. Prior to this, Villatoro served as director of customs under ex-president Elías Antonio Saca, who later faced corruption charges. In 2018, Saca pled guilty to charges of embezzlement and money laundering, receiving a 10-year prison sentence.
Conclusion
It is clear that El Salvador’s fight against financial crime remains hollow, with corrupt officials and economic elites continuing to operate with impunity. The country’s participation in international anti-money laundering efforts has been undermined by the SSF’s new regulation, which legitimizes legal loopholes that allow corrupt individuals to maintain control over their assets.
To effectively combat corruption and restore trust in its institutions, El Salvador must take concrete steps to address these issues, including:
- Closing bank accounts of suspected or formally accused money launderers
- Increasing transparency and accountability within the financial sector
- Ensuring that those responsible for financial crimes are held accountable