Financial Inclusion and Anti-Money Laundering in El Salvador: A Mixed Bag

El Salvador has made significant strides in implementing anti-money laundering (AML) measures, but still faces challenges in achieving full financial inclusion. The country’s progress is a mixed bag, with some areas showing improvement while others require further attention.

AML Implementation

According to the Financial Action Task Force (FATF), El Salvador is largely compliant with many of the technical requirements of the FATF Recommendations. The country’s banking system has been strengthened, with improved customer due diligence and record-keeping practices.

Challenges in AML Implementation

Despite progress, there are still areas that require improvement:

• Confiscation and provisional measures: El Salvador is only partially compliant with these measures.
• Non-profit organizations sector: This sector is not compliant with AML requirements, raising concerns about potential money laundering risks.

Financial Inclusion

Financial inclusion in El Salvador has also shown progress, with a growing number of people having access to financial services. However, there are still many who lack access to basic financial services, particularly in rural areas.

Key Areas for Improvement

The report highlights several key areas where El Salvador needs to improve its AML efforts:

• Strengthening the confiscation of proceeds of crime: This is essential for preventing money laundering activities.
• Improving customer due diligence for money or value transfer services: This will help to prevent potential money laundering risks.
• Enhancing the regulation and supervision of financial institutions: This will ensure that financial institutions are operating in a safe and sound manner.

International Cooperation

On a positive note, El Salvador has made significant progress in implementing international cooperation measures, such as mutual legal assistance and extradition agreements with other countries. The country’s Financial Intelligence Unit (FIU) is also actively working to improve the reporting of suspicious transactions and money laundering activities.

Recommendations

To address the challenges identified in this report, the following recommendations are made:

• Strengthen the confiscation of proceeds of crime: This will help to prevent money laundering activities.
• Improve customer due diligence for money or value transfer services: This will help to prevent potential money laundering risks.
• Enhance the regulation and supervision of financial institutions: This will ensure that financial institutions are operating in a safe and sound manner.
• Increase access to basic financial services in rural areas: This will help to promote financial inclusion.
• Improve international cooperation measures, such as mutual legal assistance and extradition agreements: This will help to prevent money laundering activities and promote global cooperation.